Gujarat High Court
M/S Yasho Industries Limited vs Union Of India on 17 October, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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C/SCA/10504/2023 JUDGMENT DATED: 17/10/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10504 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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M/S YASHO INDUSTRIES LIMITED
Versus
UNION OF INDIA & ANR.
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Appearance:
MR BHAVESH B CHOKSHI(3109) for the Petitioner(s) No. 1
MR UTKARSH R SHARMA(6157) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 17/10/2024
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Abhishek
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Rastogi for learned advocate Mr. Bhavesh
Chokshi for the petitioner and learned
advocate Mr. Utkarsh Sharma for the
respondents.
2. By way of this petition under Article 226
of the Constitution of India, the writ
applicant has approached this Court with
the following reliefs:
"a. issue an appropriate writ of
mandamus or any other writ, order or
direction quashing and setting aside
the impugned Letter dated 25.04.2023
(Annexure B) insofar as it has been
issued arbitrarily and in violation
of Article 14 of the Constitution;
b. direct respondents to consider the
amount of INR 3,36,82,000/- paid by
the petitioner company, towards the
mandate of pre-deposit, vide Form GST
DRC 03 dated 09.02.2021 and
26.12.2022 is sufficient compliance
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of section 107(6)(b) of the CGST Act
and corresponding provisions of the
IGST Act;
c. pending final hearing and disposal
of this petition, restraint the
respondents from passing any final
orders in relation to appeal No.
11/GST/CP/22-23 dated 28.12.2022,
preferred by the petitioner company
before Commissioner (Appeals) CGST &
Central Excise Appeals
Commissionerate, Surat;
d. alternatively, direct respondents
to refund INR 3,36,82,000/- paid vide
Form GST DRC-03 dated 09.02.2021 and
26.12.2022 (Annexure A);
e. grant ex parte ad interim relief
in terms of prayer clauses (c); and
f. grant any other and further relief
which this Hon'ble Court may deem fit
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and proper in the facts of the
present case."
3. The brief facts leading to filing of the
present petition can be stated as under:
3.1 The petitioner is public
limited company engaged in the business
of manufacturing and exporting
specialized chemicals such as aroma
chemicals, food antioxidants, rubber
chemicals and lubricant additives. A
substantial portion of the petitioner's
products is also exported resulting in
significant contribution to the foreign
exchange earnings of the country.
3.2 During 28.02.2018 to
14.01.2021, the petitioner company was
availing refund of IGST paid on exports
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in terms of section 16(3)(b) of the
Integrated Goods and Services Tax
Act,2017 ['IGST' Act for short] as it
stood prior to its omission by Finance
Act,2021 besides the IGST exemption
conferred by Notification No. 79/2017-Cus
dated 13.10.2017 on import of raw
materials incorporated in the manufacture
of export/exported goods on the strength
of validity issued Advance Authorization
Licenses.
3.3 The petitioner company was
precluded from availing benefits of
rebate in terms of section 16(3)(b) of
the IGST Act if imported goods enjoyed
exemptions conferred by NN 79/2017 since
09.10.2018 vide introduction of Rule
96(10) of the Central Goods and Services
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Tax Rules,2017 ['CGST' Rules for short]
read with Notification No. 54/2018-CT
dated 09.10.2018.
3.4 Aggrieved by the arbitrariness
of the aforesaid precluding provision and
corresponding notifications, the
petitioner had preferred a writ petition
before the Bombay High Court bearing W.P.
(L) No. 8839/2020 which is pending.
Parallely, the petitioner was compelled
to depart from INR 3 Crore and reverse,
"under protest", the input tax credit
equivalent to INR 3 Crore vide Form GST
DRC-03.
3.5 Thereafter, the resondent
continued to pursue their investigation
and as a consequence thereof searches
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were conducted at the premises of the
petitioner-company. Thereafter, after
recording the statement of Director of
the company and upon completion of the
investigation, a show cause notice dated
16.03.2022 was issued demanding the
refunded IGST in terms of section 16(3)
(b) of the IGST Act along with interest
and penalty.
3.6 The petitioner vide detailed
reply dated 23.05.2022 and personal
hearings dated 19.07.2022 and 10.08.2022
submitted that the matter was revenue
neutral, reversal of IGST exemption for
the period from October 2019 to
September, 2021 had been effectuated in
absence of any contravention of Rule
96(10) of CGST Rules. However, the
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respondents vide order dated 20.09.2022
had confirmed the show cause notice dated
16.03.2022 demanding of tax, penalty and
interest.
3.7 Aggrieved by the aforesaid
order, the petitioner had preferred
appeal before the Commissioner (Appeals)
bearing No. 11/GST/CP/22-23 and also
deposited the pre-deposit amount to the
tune of Rs. 3,36,82,000/- in compliance
of section 107(6)(b) of the CGST Act
utilizing the amount available in the
Electronic Credit Ledger vide Form GST
DRC-03 dated 26.12.2022. However, the
respondent No.2 vide impugned letter
25.04.2023 directed the petitioner to pay
the pre-deposit through Electronic Cash
Ledger and also directed to produce the
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relevant proof regarding the same before
or at the time of attending the personal
hearing in the matter.
Being aggrieved by the aforesaid letter,
the petitioner approached this Court by
way of present petition.
4. Learned advocate Mr. Rastogi for the
petitioner stated that the issue is
squarely covered by the decision of this
Court dated 30.11.2023 in Special Civil
Application No. 22979 of 2022. It was
submitted that the similar order is
required to be passed in this petition.
5. In view of the above, it would be germane
to reproduce the relevant paras of order
dated 30.11.2023 passed by this Court
which read as under:
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"10. Having heard the learned
advocates appearing for the
respective parties and having
gone through the material
produced on record, the only
question that falls for the
consideration of this Court is
whether the appellant, to comply
with the requirement of sub-
section (6) of Section 107 of the
CGST 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 utilizing the credit
available in the Electronic
Credit Ledger?
11. In our considered opinion, the
aforesaid question is no more res
integra. The Hon'ble Bombay High
Court in the case of Oasis Realty
(supra), having considered the
relevant provisions, held as
under:
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"9. We are not in agreement
with the submission made on
behalf of the State. This is
because 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 remaining amount of Tax
in dispute. It says 10% of Tax
has to be paid as a
precondition. That Tax can be
Integrated Tax or Central Tax
or the 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.
Therefore, in our view,
Petitioner having to pay 10% of
the Tax in dispute under clause
(b) of Sub-section (6) of
Section 107, can certainly
utilise the amount of ITC
available in the Electronic
Credit Ledger. We hasten to add
that in view of provisions of
Subsection (3) of Section 49,
the party may also pay this 10%
of the Tax in dispute by
utilising the amount available
in the cash ledger.
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10. Moreover, Sub-section (4) of
Section 49 provides the amount
available in the Electronic
Credit Ledger may be used for
making any payment towards output
tax under the MGST Act or IGST
Act subject to certain
restrictions or conditions that
may be prescribed. Sub-rule (2)
of Rule 86 of MGST Rules provides
for debiting of the Electronic
Credit Ledger to the extent of
discharge of any liability in
accordance with the provisions of
Section 49 of the MGST Act.
Further, output tax in relation
to a taxable person is defined in
Clause (82) of Section 2 of MGST
Act as the tax chargeable on
taxable supply of goods or
services or both but excludes tax
payable on reverse charge
mechanism. Therefore, any payment
towards output tax, whether self-
assessed in the return or payable
as a consequence of any
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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.
Ms. Chavan relied upon an order
of the High Court of Orissa at
Cuttack in M/s Jyoti Construction
Vs. Deputy Commissioner of CT &
GST 2021(10) TMI 524 to submit
that the amount in the credit
ledger cannot be used to pay the
10% required to be paid under
Sub-section (6) of Section 107 of
the MGST Act. In our view it will
not be necessary to discuss the
said order because subsequent to
the said order the Central Board
of Indirect Taxes and Customs,
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GST Policy Wing, Department of
Revenue, Ministry of Finance,
Government of India (CBIT&C) has,
in exercise of its powers
conferred by Section 168(1) of
the Central Goods and Services
Tax Act, 2017, issued
clarification in the form of a
circular. This clarification came
to be issued in view of various
representations that CBIT&C
received on utilisation of the
amounts available in the
Electronic Credit Ledger and the
Electronic Cash Ledger for
payment of tax and other
liabilities. The CBIT&C, in its
circular F. No.CBIC-20001/2/2022-
GST dated 6th July 2022 has
clarified as under:-
Utilisation of the amounts available in the electronic credit ledger and the
electronic cash ledger for payment of tax and other liabilities.
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6 Whether the amount available in the 1. In terms of sub-section (4) of
electronic credit ledger can be used section 49 of CGST Act, the
for making payment of any tax under amount available in the
the GST Laws? electronic credit ledger may be
used for making any payment
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towards output tax under the
CGST Act or the Integrated
Goods and Services Tax Act,
2017 (hereinafter referred to as
"IGST Act"), subject to the
provisions relating to the order
of utilisation of input tax credit
as laid down in section 49B of
the CGST Act read with rule
88A of the CGST Rules. 2.
Sub-rule (2) of rule 86 of the
CGST Rules provides for
debiting of the electronic credit
ledger to the extent of
discharge of any liability in
accordance with the provisions
of section 49 or section 49A or
section 49B of the CGST Act.
3. Further, output tax in relation
to a taxable person (i.e. a
person who is registered or
liable to be registered under
section 22 or section 24 of the
CGST Act) is defined in clause
(82) of section 2 of the CGST
Act as the tax chargeable on
taxable supply of goods or
services or both but excludes
tax payable on reverse charge
mechanism. 4. Accordingly, it is
clarified that any payment
towards output tax, whether
self-assessed in the return or
payable as a consequence of
any proceeding instituted under
the provisions of GST Laws,
can be made by utilization of
the amount available in the
electronic credit ledger of a
registered person. 5. It is
further reiterated that as output
tax does not include tax
payable under reverse charge
mechanism, implying thereby
that the electronic credit ledger
cannot be used for making
payment of any tax which is
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payable under reverse charge
mechanism.
7 Whether the amount available in the As per sub-section (4) of
electronic credit ledger can be used section 49, the electronic credit
for making payment of any liability ledger can be used for making
other than tax under GST Laws? payment of output tax only
under the CGST Act or the
IGST Act. It cannot be used for
making payment of any
interest, penalty, fees or any
other amount payable under
the said acts. Similarly,
electronic credit ledger cannot
be used for payment of
erroneous refund sanctioned to
the taxpayer, where such
refund was sanctioned in cash.
8 Whether the amount available in the As per sub-section (3) of
electronic cash ledger can be used Section 49 of the CGST Act,
for making payment of any liability the amount available in the
under the GST Laws? electronic cash ledger may be
used for making any payment
towards tax, interest, penalty,
fees or any other amount
payable under the provisions of
the GST Laws.
Therefore, CBIT&C has itself
clarified that any amount towards
output tax payable, as a
consequence of any proceeding
instituted under the provisions
of GST Laws, can be paid by
utilisation of the amount
available in the Electronic
Credit Ledger of a registered
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person. The CBIT&C has also
requested that suitable trade
notices be issued to publicize
the contents of the circular.
12. Keeping in mind the ratio laid
down by the Hon'ble Bombay High
Court in the case of Oasis Realty
(supra) as well as the circular
dated 6th July 2022 issued by the
GST Policy Wing, Central Board of
Indirect Taxes and Customs,
Ministry of Finance, Government
of India, it has been clarified
that the payment of predeposit
can be made by utilizing the
Electronic Credit Ledger (ECL).
13. In view of the aforesaid,
we hold that the the petitioner
may utilize 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. Accordingly, the impugned
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order-in appeal No.
CR/ADC/APL/147/2022 dated 25th
July 2022 passed by the
respondent No.2 is hereby quashed
and set aside. The appeal is
restored to file on the
undertaking of the petitioner
that it shall debit the
Electronic Credit Ledger within
two weeks of this order getting
uploaded towards this 10% payable
under Section 107(6) (b), if not
already debited, is accepted.
14. The petition is disposed of
accordingly."
6. Considering the facts of the present
case, the amount paid by the petitioner
as pre- deposit in compliance of section
107(6)(b) of the CGST Act utilizing the
amount of Electronic Credit Ledger is
required to be considered valid and
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impugned letter dated 25.04.2023 issued
by the respondent No.2 directing the
petitioner to pay pre-deposit amount
through Electronic Cash Ledger is
therefore, hereby quashed and set aside.
Therefore, the appeal filed by the
petitioner is required to be heard on
merits by considering the payment of pre-
deposit by the petitioner from Electronic
Credit Ledger as a sufficient compliance
of the provisions of section 107(6)(b) of
the CGST Act. The petition is accordingly
disposed of.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
JYOTI V. JANI
