Bombay High Court Allows Taxpayer To Utilise Amount Available In Electronic Credit Ledger to Pay Pre-Deposit

The Bombay High Court has held that the taxpayer 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 the CGST Act.

The division bench of Justice K.R. Shriram and Justice A.S. Doctor restored the appeal on the taxpayer's promise to debit the Electronic Credit Ledger within one week of the order being uploaded towards the 10% payable under Section 107(6)(b).

The court noted that Section 107(6)(b) requires the appellant to pay (not deposit) 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. The tax can be Integrated Tax, 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, Central Tax, State Tax, or Union Territory Tax.

The question was whether an appellant could use the credit available in the electronic credit ledger to satisfy the requirements of Section 107(6) of the MGST Act by paying a sum equal to 10% of the amount of tax in dispute arising out of the order.

Section 107(6) mandates the party to pay in full such part of the amount of tax, interest, fine, fee, and penalty arising from the impugned order as is admitted by him. Therefore, if the order provides for the amount of "tax, interest, fine, fee, and penalty" to be paid and the appellant admits those amounts, such amounts shall be paid by him before filing the appeal. It would arise only in a situation where part of the order is accepted and part of it is not accepted. It will not arise in a situation where the entire order is admitted because the party may then not want to file an appeal.

The Appellant must pay a sum equal to 10% of the remaining amount of "tax" in dispute as a result of the order from which the appeal was filed.

The department/respondent contended that the appellant could utilise the credit available only in the Electronic Cash Ledger. Section 49(4) restricts the usage of the amount available in the Electronic Credit Ledger only for payment of output tax or under MGST or under IGST. The use of the available funds for tax payment is prohibited.

The court noted that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the MGST Act, can be made by utilisation of the amount available in the Electronic Credit Ledger. Hence, a party can pay 10% of the disputed tax either using the amount available in the electronic cash ledger or the amount available in the electronic credit ledger.

Case Title: Oasis Realty Versus The Union of India

Case No: Writ Petition 23507 Of 2022

Citation: 2022 LiveLaw (Bom) 372 

Date: 16.09.2022

Counsel For Petitioner: Advocate Prakash Shah, Jas Sanghavi, Mihir Mehta and Yash Prakash

Counsel For Respondent: Advocate Vishal Agrawal, Akshit Malhotra and Hima Doshi

Click Here To Read Order