In a matter of dispute over the payment source of 10% pre-deposit for filing GST ( Goods and Services Tax ) appeal from the Electronic Credit ledger ( ECRL ) or Electronic Cash Ledger ( ECL ), the Patna High Court, set asiding the order rejecting appeal, ordered the appellate authority to consider the case on merits.
The issue raised by the GST assessee-Petitioner, Raiyan Traders is whether it could be paid from the ECRL or the ECL.
The petitioner had paid the 10% pre-deposit from the ECRL, but the Appellate Authority, in an order dated January 14, 2023, rejected the appeal, stating that the payment should have been made from the ECL. Raiyan Traders challenged this decision, leading to the present case.
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The court noted that a Division Bench of the Patna High Court had previously addressed this issue in M/s Flipkart Internet Pvt. Ltd. v. The State of Bihar & Ors., decided on September 19, 2023, where it was ruled that the per-deposit shall be made from the ECL and not ECRL.
However, the Supreme Court had stayed parts of that judgment, specifically observations in Paragraphs 77 and 78, in a special leave petition filed in December 2023. The para 77 and 78 of the case M/s Flipkart Internet Pvt. Ltd. stated that
“77. In view of the consideration above, this court is of the opinion that the appeals filed by the instant petitioners under Section 107 of the CGST/BGST Act were not maintainable as the pre-deposit ( 10 percent ) as per Section 107 (6)(b) of the Act, was not complied with by the petitioners.
78. The conclusion of the Appellate Authority that payment of pre-deposit ( 10 percent ) can only be made through ECL, requires no interference by this court exercising jurisdiction under Article 226 of the Constitution of India.”
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Thus it is clear that the Supreme Court does not favour the decision of the coordinate bench of the Patna High Court. However, the present court also does not differ from the Division Bench judgment stating that being a Coordinate Bench it binds the present bench.
While the court adhered to the Division Bench’s interpretation, it acknowledged the Supreme Court’s stay and concluded that, pending the final decision of the apex court, the present appeal should be considered on its merits. The court emphasises that this consideration on merits should continue while waiting for the Supreme Court’s final decision.
Additionally, the court referred to Notification No. 53/2023 issued by the Ministry of Finance on November 2, 2023, which allowed delayed appeals under Section 107 of the GST Act. The notification required 12.5% of the due amounts to be paid to the Department, with at least 20% of that sum to be paid from the Electronic Cash Ledger, implicitly acknowledging the use of the Electronic Credit Ledger for the remaining balance.
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Chief Justice Vinod K Chandran and Justice Nani Tagia observing the notification stated that “In the said Notification issued by the Central Government on the recommendation of the GST Council, it has been specifically stated that at least 20 per cent of the 12.5 per cent remaining due and payable should be paid from the Electronic Cash Ledger. Hence, even the GST Council understood the ten per cent to be enabled for payment through the Electronic Credit Ledger.”
As the petitioner had already paid the 10% pre-deposit from the Electronic Credit Ledger, the court ruled that the appeal was maintainable and directed the Appellate Authority to review the case on its merits. The appeal was allowed.
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