Simplified Explanation of the Judgment
The Patna High Court recently delivered an important judgment concerning the Goods and Services Tax Act, 2017 (GST Act). The dispute revolved around whether the mandatory pre-deposit of 10% of the disputed tax amount (required for filing an appeal under Section 107 of the GST Act) should be made from the Electronic Cash Ledger or if it could also be made from the Electronic Credit Ledger.
The petitioner, a business entity, had challenged an order passed by the Appellate Authority. In its case, the business had deposited the mandatory 10% pre-deposit using its Electronic Credit Ledger instead of the Electronic Cash Ledger. However, the Appellate Authority rejected the appeal, holding that the pre-deposit had to be made strictly from the Electronic Cash Ledger.
The petitioner approached the Patna High Court, arguing that the law was unclear and that such a rigid interpretation would cause undue hardship.
The Court examined the legal position in light of earlier judicial pronouncements and government notifications. It referred to a previous Division Bench ruling in M/s Flipkart Internet Pvt. Ltd. v. State of Bihar & Ors. (CWJC No. 1848 of 2023, decided on 19.09.2023), where the Court had ruled that the pre-deposit must come from the Electronic Cash Ledger. However, the Supreme Court had subsequently stayed certain observations of that ruling (Paragraphs 77 and 78) on 04.12.2023, which created an interim uncertainty.
Additionally, the Court took note of Notification No. 53/2023 dated 02.11.2023 issued by the Central Government. This notification, while allowing delayed appeals, specifically permitted part of the pre-deposit to be made through the Electronic Credit Ledger. This showed that even the GST Council recognized the possibility of using credit ledger balances for pre-deposit purposes.
After carefully considering these developments, the Patna High Court decided that the appeal filed by the petitioner should not be rejected solely on technical grounds of the source of payment. The Court observed that since the issue was pending before the Supreme Court, insisting on a strict condition of payment only from the Cash Ledger would be unfair and contrary to the principle of justice.
Therefore, the High Court set aside the Appellate Authority’s rejection order and directed that the appeal should be heard and decided on merits. Importantly, the Court clarified that until the Supreme Court gives a final ruling, authorities in Bihar must not insist on pre-deposit being made exclusively from the Cash Ledger, as long as the required 10% has been deposited, whether from cash or credit.
Significance or Implication of the Judgment
This ruling carries wide implications for businesses in Bihar and across India that are contesting tax demands under GST:
- Relief to taxpayers: Businesses will not face dismissal of their appeals just because they deposited the mandatory pre-deposit through the Electronic Credit Ledger instead of the Cash Ledger.
- Clarity pending Supreme Court decision: The High Court has ensured that appeals are not lost on technicalities while the issue is under active consideration by the Supreme Court.
- Fairness in tax litigation: The decision balances the need for revenue collection with the taxpayer’s right to appeal and ensures that technical hurdles do not block access to justice.
- Influence on administrative practice: The ruling directs the Commercial Taxes Department to consider appeals on merits without insisting on cash-only deposits.
In effect, this judgment prevents unnecessary hardships for businesses and keeps their statutory right of appeal intact.
Legal Issue(s) Decided and the Court’s Decision
- Issue: Whether the 10% pre-deposit under Section 107 of the GST Act must be made exclusively from the Electronic Cash Ledger.
- Court’s Finding:
- The Court noted that a Division Bench had previously held that deposits must come from the Cash Ledger.
- However, since the Supreme Court has stayed certain parts of that judgment, the issue is not settled.
- Government notification (No. 53/2023) indicates that even the GST Council allowed deposits partly through the Credit Ledger.
- Therefore, until the Supreme Court clarifies, appeals must be admitted if 10% has been deposited, whether from Cash or Credit Ledger.
Final Decision: The rejection order was set aside. The appeal must be heard on merits, and no insistence shall be made for deposits exclusively from the Cash Ledger.
Judgments Relied Upon or Cited by Court
- M/s Flipkart Internet Pvt. Ltd. v. State of Bihar & Ors., CWJC No. 1848 of 2023 (decided on 19.09.2023) – Division Bench ruling requiring deposit from Cash Ledger (partially stayed by the Supreme Court on 04.12.2023).
Case Title
M/s Friends Mobile v. The State of Bihar & Ors.
Case Number
Civil Writ Jurisdiction Case No. 6457 of 2023
Coram and Names of Judges
- Hon’ble the Chief Justice K. Vinod Chandran
- Hon’ble Mr. Justice Rajiv Roy
Names of Advocates and who they appeared for
- For the Petitioner: Mrs. Archana Sinha, Advocate
- For the Respondents: Mr. P.K. Shahi, Advocate General and Mr. Vikash Kumar, Standing Counsel-11
Link to Judgment
MTUjNjQ1NyMyMDIzIzEjTg==-rg–ak1—-am1–vd8ZFQM=
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
