Madras High Court
M/S.Ford India Private Limited vs The Office Of The Joint Commissioner ... on 22 November, 2024
Author: Krishnan Ramasamy
Bench: Krishnan Ramasamy
W.P.Nos.35448 of 2023 etc., batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 24.10.2024
PRONOUNCED ON : 22.11.2024
CORAM :
THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY
W.P.Nos.35448, 35451 of 2023, 24103 of 2022, 6571, 6579, 6583, 7261, 7264,
7265, 7266, 13462 & 14295 of 2024
and
W.M.P.Nos.35412, 35415 of 2023, 7294, 7295 ,7297, 7300, 7308, 7310, 8107,
8110 to 8114, 14616, 14617, 15521 & 15522 of 2024
W.P.No.35448 of 2023
M/s.Ford India Private Limited,
Rep. by its Authorized Signatory,
Srinivasan Kadirvelu ... Petitioner
Vs.
1.The Office of the Joint Commissioner (ST),
GST Appeals, Large Taxpayers Unit,
New Integrated Building,
South Tower, Nandanam, Chennai-600035.
2.The Deputy Commissioner (S.T.)-III,
Large Taxpayers Unit,
New Integrated Building,
South Tower, Nandanam, Chennai-600035. ... Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
praying this Court to issue a Writ of Certiorarified Mandamus, to call for the
records relating to the Deficiency Memo in Rc.No.1182/2023/A2, dated
27.11.2023 issued by the 1st respondent and to quash the same and to direct the
https://www.mhc.tn.gov.in/judis
1/15
W.P.Nos.35448 of 2023 etc., batch
1st respondent to accept the payment of pre-deposit of Rs.3,28,836/- made
through debiting the Electronic Credit Ledger as sufficient compliance of
Section 107(6) of the CGST Act.
For Petitioner : Mr.Raghavan Ramabadran
For Respondents : Mr.Haja Nazirudeen,
Additional Advocate General,
assisted by Mr.V.Prashanth Kiran,
Government Advocate (T)
COMMON ORDER
Since the issue involved in these Writ Petitions is one and the same,
these Writ Petitions are taken up together and disposed of by way of this
common order.
2.The facts that led to the filing of all these Writ Petitions are one and
the same. Therefore, it is worth taking a case of W.P.No.35448 of 2023 alone
for discussion.
3.The petitioner is engaging 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
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
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.
Thereafter, on 30.05.2023, he was issued with a show cause notice in Form
DRC-01('SCN'). Consequently, the 2nd respondent confirmed the demand
proposed in the SCN along with interest and penalty vide Order-in-Original
No.ZD330723115801Q, dated 26.07.2023.
4.Aggrieved by the same, the petitioner filed an appeal before the 1st
respondent through the GST portal on 24.10.2023 by paying 10% of the dispute
tax demand of RS.32,88,352/- as pre-deposit, which is mandatory as per Section
107(6) of the Tamil Nadu Goods and Service Act, 2017 (hereinafter referred to
as ' TNGST Act') and also filed a physical copy of the said appeal on
27.10.2023. The petitioner had opted to pay the pre-deposit by debiting their
Electronic Credit Ledger. However, the 1st respondent issued a Deficiency
Memo dated 27.11.2023, 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.
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
5.The learned counsel appearing for the petitioners would submit that
Section 107(6)(b) of TNGST Act mandates payment of a sum equal to 10% of
the remaining amount of tax in dispute as pre-deposit, while filing an appeal
under Section 107 of TNGST Act. There is an express provision in Section
49(4) of TNGST Act, which allows utilization of the amount available in the
Electronic Credit Ledger for payment of output tax. Further, Rule 86(2) of the
TNGST Rules, 2017 allows debiting of Electronic Credit Ledger for discharge
of liability in accordance with Section 49 of TNGST Act. Section 2(82) of
TNGST Act defines the phrase 'output tax' in relation to a taxable person, as the
tax chargeable under this Act on taxable supply of goods or service or both
made by him or by his agent but excludes tax payable by him on reverse charge
mechanism. Therefore, any payment towards output tax, whether self-assessed
in the Return or payable as a consequence of any proceedings instituted under
TNGST Act, can be made by utilization of the amount available in the
Electronic Credit Ledger.
6.He would further submit 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
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
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. 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,
which is evident from Sl.No.15(b) therein. Therefore, the impugned deficiency
memo has to be set aside.
7.In support of his contention, he has relied upon the following
judgments:-
(i)Oasis Realty Vs. Union of India reported in 2023 (71) GSTL 158
(Bombay High Court);
(ii)Friends Mobile through its Proprietor Md.Quadir Khan Vs. State
of Bihar and other reported in 2023(12) TMI 469 (Patna High Court); and
(iii)Raiyan Traders Vs. State of Bihar reported in 2024-VIL-978
(Patna High Court).
8.The learned Additional Advocate General appearing for the
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
respondents would submit 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. Under Section 49(3) of TNGST Act, the payments from the
Electronic Cash Ledger are for the payment towards tax, interest, penalty, fees
or any other amount payable under the provisions of the Act or the Rules.
Further in terms of Section 49(4) of TNGST Act, the payment from the
Electronic Credit Ledger are for the payment towards output tax under the Act.
This clearly establishes that the Electronic Credit Ledger should only be used
for the payment of output tax and cannot be misconstrued and the payment of
pre-deposit for filing an appeal should only be made from the Electronic Cash
Ledger. Further, the payment towards the output tax cannot be equated with
pre-deposit.
9.He would further submit that in Oasis Reality's case referred to by
the learned counsel for the petitioners, the dispute is that output tax can be paid
from Electronic Credit Ledger. However, in the instant case, the question of
dispute involved is pre-deposit for filing the appeal against the order with regard
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
to the input tax credit. As per Section 41(2) of TNGST Act, the input tax credit
can be utilized for payment of “self-assessed output tax as per the return”. In
the circular issued by the CBIT & C dated 06.07.2022, it has been said that any
amount towards output tax payable as a consequence of any proceedings
instituted under the provisions of GST Laws, can be paid by utilization of the
amount available in the Electronic Credit Ledger of a registered person and in
sub paragraph (5) of paragraph 6 it is stated that “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 payable under reverse charge mechanism.”. The
said circular stipulates that Electronic Credit Ledger can be used only for
making payments towards tax, interest, penalty, fees or any other amounts and
not the tax in dispute. Hence, he opposed these Writ Petitions.
10.In support of his contention, he has relied upon the judgments
rendered in the case of Jyoti Construction Vs. Dy.Commissioner of Cnetral
Tax & GST, Jaipur reported in 2021 (54) GSTL 279 (Orissa HC) & Flipkart
Internet Pvt. Ltd., Vs. State of Bihar reported in 2023-VIL-927 (Patna HC).
11.I have given due consideration to the submissions made on either
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
side and perused the materials available on record carefully.
12.The issue to be decided in this matter is whether the petitioners are
entitled to pay 10% of the disputed amount as a pre-condition in filing appeal by
way of debiting the amount available in the Electronic Credit Ledger.
13.Admittedly, in terms of Section 107(6) of TNGST Act, it is
mandatory to deposit 10% of the disputed amount as a pre-condition to file an
appeal before the appellate authority. At this juncture, it is necessary to extract
Section 107(6) of TNGST Act hereunder:-
“(6)-No Appeal shall be filed under sub-section (1), unless
the appellant has paid-
(a)in full, such part of the amount of tax, interest, fine, fee
and penalty arising from the impugned order, as is admitted by him;
and
(b)a sum equal to ten per cent of the remaining amount of
tax in dispute arising from the said order, in relation to which the
appeal has been filed.”.
14.The petitioners filed appeals by paying 10% of the disputed tax,
utilizing the amount available in the Electronic Credit Ledger. However, the 1st
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
respondent has dismissed the appeals filed by the petitioners on the ground that
the pre-deposit has to be paid through Electronic Cash Ledger and not through
Electronic Credit Ledger and the amount available in the Electronic Credit
Ledger can be utilized only for the purpose of payment towards output tax in
terms of Section 49(4) of TNGST Act. It is necessary to extract Section 49(4)
of TNGST Act hereunder:-
“49(4)The amount available in the electronic credit ledger
may be used for making any payment towards output tax under this
Act or under the Integrated Goods and Services Tax Act in such
manner and subject to such conditions and restrictions within such
time as may be prescribed.”
15.A reading of the above Section would show 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'. 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
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
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 any liability in accordance with the provisions of Section 49
or 49A or Section 49B. It is also relevant to extract Section 49A and 49B
hereunder:-
“Section 49A-Utilisation of input tax credit subject to
certain conditions.-
Notwithstanding anything contained in section 49, the
input tax credit on account of central tax, State tax or Union
territory tax shall be utilized towards payment of integrated tax,
central tax, State tax or Union territory tax, as the case may be, only
after the input tax credit available on account of integrated tax has
first been utilized fully towards such payment.
Section 49B. Order of utilisation of input tax credit.-
(1) Notwithstanding anything contained in this Chapter
and subject to the provisions of clause (e) and clause (f) of sub
section (5) of section 49, the Government may, on the
recommendations of the Council, prescribe the order and manner of
utilisation of the input tax credit on account of integrated tax,
central tax, State tax or Union territory tax, as the case may be,
towards payment of any such tax.”
16.A reading of the above would show that the Government on
recommendation of the Council prescribe the order and manner of utilization of
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
the input tax credit on account of integrated tax, Central tax, State tax or Union
territory tax, as the case may be, towards payment of any such tax. After due
compliance of the provisions, which is also an admitted position, the Central
Board of Indirect Taxes and Customs in its circular dated 06.07.2022 in
paragraph 4 of Sl.No.6, stated as follows:-
“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.”
17.A reading of the said circular shows that 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. Further, as contended by the
petitioners that the only restrictions on the usage of Electronic Credit Ledger for
payment of pre-deposit is in respect of tax payable under reverse charge
mechanism, as the same is outside the ambit of Section 2(82) of TNGST Act. In
the present case, there was no remark under reverse charge mechanism on the
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
petitioners in these proceedings.
18.It is to be noted that the statutory appeal form APL-01 provides for
the mechanism to pay pre-deposit by utilizing Electronic Credit Ledger as well.
Further, vide circular dated 02.11.2023 the CBI & C prescribed special
procedure for filing appeals beyond the time period specified under Section 107
of TNGST Act on condition that out of 12.5% of the prescribed mandatory
deposit, 20% ie., (2.5%) has to be paid by debiting the Electronic Cash Ledger.
Therefore, it is evident that the remaining statutory mandatory pre-deposit (10%
of the disputed tax) under Section 107(6) of TNGST Act can be very well made
by using the amount available in Electronic Credit Ledger.
19.In Jyothi Construction's case referred to by the respondents, the
Orissa High Court has not accepted the plea of the petitioner therein that 'output
tax', as defined under Section 2(82) of the OGST Act could be equated to the
pre-deposit required to be made in terms of Section 107(6) of the OGST Act.
However, subsequent to the said judgment, the Patna High Court in Friends
Mobile's case, Raiyan Traders' case and the Bombay High Court in Oasis
Realty's case, held that 10% of the statutory deposit can be paid through
Electronic Credit Ledger.
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
20.Further, it is brought to the notice of this Court that the judgment
rendered in Flipkart Internet Pvt Ltd.,'s case relied on by the respondents has
been stayed by the Hon'ble Supreme Court in Special Leave Application to
Appeal No.25437 of 2023, order dated 04.12.2023.
21.Therefore, for all these reasons, this Court has no hesitation to
come to the conclusion 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. These Writ Petitions are allowed
with a direction to the 1st respondent to take up the appeals filed by the
petitioners on record, in the event if the appeals are dismissed only on the
ground that pre-deposit has been made through Electronic Credit Ledger. It is
made clear that the pre-deposit can be made by filing appeal under Section 107
of TNGST Act by utilizing the Electronic Credit Ledger. No costs.
Consequently, connected miscellaneous petitions are closed.
22.11.2024
NCC : Yes / No
Index : Yes / No
Internet : Yes / No
Yuva
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
To
1.The Office of the Joint Commissioner (ST),
GST Appeals, Large Taxpayers Unit,
New Integrated Building,
South Tower, Nandanam, Chennai-600035.
2.The Deputy Commissioner (S.T.)-III,
Large Taxpayers Unit,
New Integrated Building,
South Tower, Nandanam, Chennai-600035.
Note: Issue Web Copy today
https://www.mhc.tn.gov.in/judis
W.P.Nos.35448 of 2023 etc., batch
KRISHNAN RAMASAMY, J
Yuva
W.P.Nos.35448 of 2023 etc., batch
22.11.2024
https://www.mhc.tn.gov.in/judis
