The Bombay High Court has held that payment towards output tax can be made by utilisation of the amount available in the Electronic Credit Ledger (ECL) of a registered person.
Oasis Realty, the petitioner filed the petition in questioning Whether, an Appellant, to comply with the requirements of Sub-section 6 of Section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act) of paying a sum equal to 10% of the amount of Tax in dispute arising out of the impugned order, can pay the amount utilising the credit available in the Electronic Credit Ledger?
The Petitioner viewed that it could be used and the revenue was of the view that it cannot be. According to Revenue, the Appellant can utilise the credit available only in the Electronic Cash Ledger.
The provisions relevant to the issue at hand are Sub-sections (1), (6) and (7) of Section 107, Sub-sections (1), (2), (3), (4), (5) and (6) of Section 49 and Sub-section (82) of Section 2 of the MGST Act.
It was stated that the input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, by section 41, to be maintained in such manner as may be prescribed.
The respondent argued that Sub-section (4) of Section 49 restricts the usage of the amount available in the Electronic Credit Ledger only for payment of output tax or under MGST or IGST and the amount available cannot be utilised for payment of tax under clause (b) of Sub-section (6) of Section 107.
“Clause (b) of Sub-section (6) of Section 107 provides a precondition, “unless the appellant has paid” (not deposited) a sum equal to 10% of the remaining amount of Tax in dispute. It says 10% of Tax has to be paid as a precondition. That Tax can be an Integrated Tax or Central Tax or State Tax as in the case at hand, or Union Territory Tax. The amount of ITC available in the Electronic Credit Ledger can be utilised towards payment of Integrated Tax or Central Tax or State Tax or Union Territory Tax.”, the Court viewed.
Central Board of Indirect Tax (CBIT&C) has itself clarified that any amount towards output tax payable, as a consequence of any proceeding instituted under the provisions of Goods and Service Tax (GST) Laws, can be paid by utilisation of the amount available in the Electronic Credit Ledger of a registered person. The CBIT&C has also requested that suitable trade notices be issued to publicize the contents of the circular.
Ms Chavan, the AGP submitted that this clarification will not apply to tax payable on the reverse charge mechanism. Mr. Prakash Shah stated that sub-paragraph (5) of paragraph 6 of the circular reproduced in paragraph (11) above makes it clear that an Electronic Credit Ledger cannot be used for making payment of any tax that is payable under the reverse charge mechanism.
A division bench comprising Justice K. R. Shriram & Justice A. S. Doctor held that since the amounts payable are towards output tax, the Petitioners may utilise the amount available in the Electronic Credit Ledger to pay the 10% of Tax in dispute as prescribed under Sub-section (6) of Section 107 of MGST Act.
The Court quashed and set aside the impugned order and allowed the petition.
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