Supreme Court allows Revival of Flipkart’s GST Appeal Rejected due to Non-payment of Pre-deposit from Cash Ledger [Read Order]

The Supreme Court has allowed the revival of the famous Flipkart’s Goods andServices Tax ( GST ) appeal which was rejected on grounds of non-payment of 10% pre-deposit from the Electronic Cash Ledger (ECL).

Justice B V Nagarathna and Justice R. Mahadevan directed the GST department to give instructions with regard to interpretation to be given to Sections 49 and 107 of the Act read with clarification Circular dated 06.07.2022, instructions issued on 28.10.2022 and Notification No.53/2023 - Central Tax dated 02.11.2023 and file an affidavit in that regard.

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“Pending disposal of these special leave petitions, we permit the petitioners herein to make appropriate application(s) before the concerned appellate authority for the purpose of revival of their appeals having regard to the order of the Patna High Court in Raiyan Traders Vs. State of Bihar (2024) 24 Centax 71 (Pat.)” ruled the apex court granting relief to the E-commerce giant.

Flipkart, had approached the Supreme Court after the Patna High Court upheld the rejection of their appeals on the ground that the pre-deposit under Section 107(6) of the GST Act could not be paid through the Electronic Credit Ledger (ECRL).

The background of the matter is that the famous E-commerce platform, Flipkart had challenged assessment orders issued under Section 73 of the CGST Act, where tax demands were raised on grounds such as mismatch of Input Tax Credit (ITC).

In filing their statutory GST appeals, Flipkart and other petitioners discharged the 10% pre-deposit by utilising their Electronic Credit Ledger, relying on CBIC Circulars dated 06.07.2022 and 28.10.2022.

The Appellate Authority rejected several GST appeals on the ground that the statutory pre-deposit under Section 107(6) must be paid strictly through the Electronic Cash Ledger. It held that using the Electronic Credit Ledger (ECRL) for this purpose violates Section 49(3) of the CGST Act read with Rule 85(4) of the CGST Rules, which restrict the utilisation of ITC credit. As a result, the appeals were treated as “defective” and declared non-maintainable.

After that, the petitioners approached the Patna High Court, where it confirmed the order of the appellate authority holding that the 10% pre-deposit qualifies as “any other amount” under Section 49(3), a category that, by law, can be discharged only through the Cash Ledger and not by debiting Input Tax Credit.

The apex court has directed the petitioners to file applications for restoration of the appeals to be filed within a period of two weeks from today. Also the court clarified that “The issue of delay in filing the appeals and making pre- deposit amount shall not be raised either by the Department or by the appellate authority.”

By granting this relief, the Supreme Court has kept the matter alive and listed it for a later date, where it is expected to examine the issue on merits and provide a detailed judgement on the validity of paying the mandatory pre-deposit through the Electronic Credit Ledger.

In the case of Raiyan Traders Vs State of Bihar, cited by the Supreme Court, the Patna High Court allowed to make a pre-deposit from the Credit Ledger. Therefore, the court applied the same ruling here for allowing the revival of the appeal.

Since the Court has allowed Flipkart to revive its appeal with full protection while stopping the Department from raising objections on limitation of filing appeal or payment of pre-deposit, it shows an inclination to reconsider, and depart from the interpretation adopted by the Patna High Court.

Many senior advocates including Mr. Arvind Datar, Mr. Tarun Gulati..etc appeared for the parties before the Supreme Court.

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