The Allahabad High Court has directed the Uttar Pradesh GST authorities to permit a taxpayer to use the excess amount available from ₹1.40 crore deposited under protest for making the mandatory 10% pre-deposit against a disputed Integrated Goods and Services Tax (IGST) demand.
The Bench of Justice Saumitra Dayal Singh and Justice Vivek Saran observed that difficulties arising from “machine driven procedures” must be resolved through intervention by departmental officials.
The petitioner/assessee challenged a DRC-16 recovery notice dated December 18, 2025, arguing that the department was pressing for recovery while simultaneously preventing it from using the excess deposit to file an appeal.
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During an investigation against the petitioner, it deposited ₹1.40 crore on different dates. While making the payments, the petitioner classified the amounts under either the Central GST or State GST head.
The Revenue authorities treated the money as amounts deposited under protest towards CGST and SGST demands.
The investigation initially resulted in several adjudication orders raising an aggregate demand of ₹7,06,66,700. These orders were challenged in appeal.
The petitioner was permitted to adjust ₹70,66,670 from the amount already deposited as the statutory pre-deposit required to maintain the first appeals. Those appeals remained pending.
The petitioner was subsequently faced with another adjudication order dated December 12, 2023, recording a total demand of ₹9,38,47,074.
According to the High Court order, the demand comprised: IGST of ₹6,66,73,522, CGST of ₹93,20,977, and SGST of ₹93,20,977.
Following a rectification order dated March 30, 2025, the total demand was reduced to ₹5,30,20,854. The revised demand consisted of IGST of ₹4,14,16,608 and CGST and SGST of ₹58,02,123 each.
The authorities permitted the petitioner to use the amount deposited under protest for satisfying the 10% pre-deposit requirement concerning the disputed CGST and SGST components.
However, the same facility was not made available for the IGST component of ₹4,14,16,608 arising from the same adjudication and rectification proceedings.
The apparent reason was that the petitioner had originally entered the deposits under the CGST and SGST statutory heads. Consequently, the electronic system did not permit the available amount to be adjusted towards the pre-deposit for an appeal involving IGST.
The High Court noted that the department admitted that the ₹1.40 crore had been deposited under protest.
The department had also permitted adjustment from that amount against the first group of adjudication orders as well as the CGST and SGST demands arising from the subsequent adjudication and rectification proceedings.
In these circumstances, the Court held that no finality had attached to the ₹1.40 crore. Its character continued to remain that of a deposit made under protest.
The Bench found that the problem was essentially the result of machine-driven procedures.
The taxpayer could use the available deposit for appeals concerning the CGST and SGST demands but could not make an identical adjustment for the IGST demand arising from the same orders.
The High Court said that there was no genuine dispute between the parties regarding the petitioner’s entitlement to seek adjustment against the deposited amount.
It observed that the procedural difficulty created by the electronic system had to be redressed by the respondent authorities through human intervention.
Accordingly, the Court directed the authorities to ensure that the petitioner is enabled to make the 10% pre-deposit for the IGST demand from any excess amount available out of the ₹1.40 crore deposited under protest.
The adjustment must be allowed in the same manner as it had been permitted for the disputed CGST and SGST demands arising from the same proceedings.
The authorities were also given liberty to issue any necessary communication to the concerned respondent to facilitate the adjustment.
The High Court prescribed an alternative mechanism in case the department is unable to implement the adjustment within one month from the date of its order.
If the required measures are not completed within that period, the petitioner will be entitled to file the appeal against the IGST demand through either online or offline mode.
For this purpose, the competent authority must issue a certificate confirming that an adequate amount is available from the deposit already made by the petitioner.
The Bench further directed that, subject to the petitioner filing the appeal, no additional recovery should be made pursuant to the adjudication order as rectified on March 30, 2025.
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