The Madras High Court has upheld the pre-deposit made through electronic credit ledger by Ford India.
The bench of Justice Krishnan Ramasamy has observed that as per the CBIC dated 06.07.2022 input tax credit can be utilized not only for payment of the self assessed output tax but also payable as a consequence of the proceeding instituted under the provisions of GST Laws. This circular also clarifies the position that to discharge the liability of 10% of the output tax liability in terms of Section 107(6) of TNGST Act, the amount can be remitted through Electronic Credit Ledger.
The bench interpreted Section 49(4) of TNGST Act and stated that the amount available in the Electronic Credit Ledger may be used for making any payment towards output tax. The word used in the above provision is ‘may’ and it is not ‘shall’.
The bench added that in the event if the word ‘shall’ is used, the amount available in the Electronic Credit Ledger shall be utilized only for the purpose of payment of output tax. Further, in terms of Section 107(6) of TNGST Act, if 10% of the disputed tax has to be paid, it means that the deposit is made only towards discharging liability of output tax. In the event if the appellants are not succeeding, the amount paid by utilizing the Electronic Credit Ledger will be taken as output tax alone. Therefore, at no stretch of imagination, one can arrive at a conclusion that 10% of the amount paid as pre-condition for filing an appeal can be utilized other than the discharge of output tax.
“Rule 86(2) of TNGST Rules provides that Electronic Credit Ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of Section 49 or 49A or Section 49B,” the bench remarked.
The petitioner/assessee is engaged in the business of manufacturing and supplying passenger cars, parts, components and engines. He has duly filed GST returns periodically and discharged appropriate tax liability under the provisions of CGST Act.
While being so, on 24.03.2023, he was issued with a notice in Form DRC-01A, proposing to demand the differential GST on account of tax liability difference between Form GSTR-1 and GSTR-3B Returns filed by him for the period of 2017 to 2018, for which, he, vide letter dated 05.04.2023, has filed a detailed reply along with relevant documents.
The petitioner was issued with a show cause notice in Form DRC-01. Consequently, the respondent confirmed the demand proposed in the SCN along with interest and penalty.
the petitioner filed an appeal through the GST portal by paying 10% of the dispute tax demand as pre-deposit, which is mandatory as per Section 107(6) of the Tamil Nadu Goods and Service Act, 2017 and also filed a physical copy of the appeal. The petitioner had opted to pay the pre-deposit by debiting their Electronic Credit Ledger.
However, the Office of the Joint Commissioner issued a Deficiency Memo, directing the petitioner to make the payment of pre-deposit only by way of debiting the Electronic Cash Ledger within 7 days from the date of receipt of the Deficiency Memo. Challenging the same, the petitioner has filed this Writ Petition.
The assessee contended that as per the circular issued by the Central Board of Indirect Taxes and Customs (CBIT & C) in Circular No.172/04/2022-GST, dated 06.07.2022, the Electronic Credit Ledger can be utilized for payment of 10% of tax in dispute as pre-deposit under Section 107(6)(b) of TNGST Act. The only restriction on the usage of Electronic Credit Ledger for payment of pre-deposit is in respect of the tax payable under reverse charge mechanism, as the same is outside the ambit of Section 2(82) of TNGST Act.
The assessee argued that there is no demand under reverse charge mechanism on the petitioners in these proceedings. The statutory appeal form in APL-01 provides for the mechanism to pay the pre-deposit using the Electronic Credit Ledger as well.
The department urged that as per Section 107(6) of TNGST Act, 10% of the tax liable amount has to be paid for filing an appeal by the petitioners as pre- deposit. It does not state that the pre-deposit amount is the tax amount. The petitioners paid the pre-deposit through Electronic Credit Ledger, which has to be paid only through Electronic Cash Ledger as contemplated under Section 49 of TNGST Act.
The court held that the pre-deposit can be made through Electronic Credit Ledger. Therefore, the impugned orders passed by the 1st respondent are liable to be quashed, accordingly, quashed.
Case Details
Case Title: M/s.Ford India Private Limited Versus The Office of the Joint Commissioner (ST)
Case No.: W.P.Nos.35448, 35451 of 2023, 24103 of 2022, 6571, 6579, 6583, 7261, 7264, 7265, 7266, 13462 & 14295 of 2024
Date: 22.11.2024
Counsel For Appellant: Raghavan Ramabadran
Counsel For Respondent: Haja Nazirudeen
