the essay of 4 June 2025 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">JUNE 04, 2025</font></strong></font></p> <p align="center"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST Appeals - Electronic Credit Ledger: A Digital Mirage?</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u>By Vijay Kumar</u></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECOGNISED</STRONG> facts: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. GST is paid through The Electronic Cash Ledger or the Electronic Credit Ledger. Money flows into the Electronic Cash Register by cash deposits made by the taxpayer and to the Electronic Credit Register by input tax credit earned by the taxpayer. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. For making an appeal against an order by an adjudicating authority, a pre-deposit of ten per cent of the disputed tax amount has to be paid. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the disputed question is <em>"Can this pre-deposit be made from the Electronic Credit Ledger?" </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 2022, the Board (CBIC) in Circular No. <strong><a href="https://taxindiaonline.com/gst/details?id=29619&view=notification&type=notification" target="_blank">172/04/2022-GST</a></strong>, dated 6th July 2022 explained this as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>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. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Jyoti Construction Vs. Deputy Commissioner of CT & GST (October 07, 2021) </em><strong><em>- <a href="https://taxindiaonline.com/searchcaselaw/details?id=168569&type=caselaw&keyword=null" target="_blank">2021-TIOL-2007-HC-ORISSA-GST</a></em></strong>, the High Court of Orissa held: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>The proviso to Section 41 (2) of the OGST Act limits the usage to which the ECRL could be utilised. It cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of Section 107 (6) of the OGST Act. It is not therefore possible to accept the plea that Section 107 (6) of the OGST Act is merely a "machinery provision". </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And upheld the view of the Department at that time that the amounts in the Electronic Credit Register cannot be used for payment of pre-deposit for filing appeals. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue in <em>Oasis Realty vs Union of India (September 16, 2022)was:<strong> <a href="https://taxindiaonline.com/searchcaselaw/details?id=173324&type=caselaw&keyword=null" target="_blank">2022-TIOL-1287-HC-MUM-GST</a> </strong></em></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Whether, an Appellant, to comply with the requirement of paying a sum equal to 10% of the amount of Tax in dispute arising out of the impugned order, can pay the amount utilising the credit available in the Electronic Credit Ledger? </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the High Court held, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>Since in the Petitions before us the amounts payable are towards output tax, we hold that Petitioners 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 MGST Act. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Shiv Crackers vs Chief Commissioner of CGST and CE (November 30, 2023) <strong> - <a href="https://taxindiaonline.com/searchcaselaw/details?id=180752&type=caselaw&keyword=null" target="_blank">2024-TIOL-473-HC-AHM-GST</a></strong></em>, the Gujarat High Court held, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>Keeping in mind the ratio laid down by the Hon'ble Bombay High Court in the case of Oasis Realty 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). </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>In view of the aforesaid, we hold that 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. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue has taken this case in SLP to the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Yasho Industries Ltd Vs Union of India (October 17, 2024)</em>, the Gujarat High Court was called in to decide the issue again. <strong><a href="https://taxindiaonline.com/searchcaselaw/details?id=183792&type=caselaw&keyword=null" target="_blank">2024-TIOL-1846-HC-AHM-GST</a></strong> </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>Considering the facts of the present case, the amount paid by the petitioner as pre- deposit utilizing the amount of Electronic Credit Ledger is required to be considered valid and impugned letter 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 predeposit by the petitioner from Electronic Credit Ledger as a sufficient compliance of the provisions of section 107(6)(b) of the CGST Act. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the <em>Flipkart Internet Pvt Ltd case (September 19, 2023), the Patna High Court held, <strong><a href="https://taxindiaonline.com/searchcaselaw/details?id=179194&type=caselaw&keyword=null" target="_blank">2023-TIOL-1676-HC-PATNA-GST</a></strong></em> </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>The irresistible conclusions from simple reading of Section 49 of the Act, therefore, is that amount in ECRL cannot be utilized for the purposes of paying the pre-deposit (10 percent) under Section 107 (6) of the CGST/BGST Act as this amount is neither an output tax under the BGST/SGST Act, nor is this amount due under the Integrated Goods and Services Tax Act. This is further clarified from perusal of Sub-Sections (1) and (2) of Section 49 of the CGST/BGST Act. From plain reading of these two provisions, it is clear that actual deposits are made in the ECL through internet banking, credit or debit cards or any FD or RTGS settlement or by such other mode. The balance in ECRL, however, is a self-assessed input tax credit of the registered person. The amounts are credited on a provisional basis in the Electronic Credit Ledger, which is apparent from Section 41 of the BGST/SGST Act and are subject to an assessment proceeding to determine the amount of credit eligible for being utilized by the registered person. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This matter is in appeal before the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Yasho case was taken to the Supreme Court by Revenue relying on the fact that the Assessees' petitions have been entertained by this Court and, therefore, on that basis, notices were issued in the case of <em>Chief Commissioner of CGST Vs. Shiv Crackers</em>. When that case came up for hearing recently, Abhishek A Rastogi, Counsel brought to the notice of the Court the fact that initially notices were issued by this Court in the Special Leave Petitions filed by the Assessees. The respondent(s) ought not to have relied upon those cases for the purpose of seeking notice(s) in their Petitions also. In the circumstances, he submitted that there is no merit in this special leave petition. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department's contention is that since similar matters are pending before this Court, this case also may be tagged with those cases. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court held: <em>Union of India Vs Yasho Industries Ltd (May 19, 2025)- <strong><a href="https://taxindiaonline.com/searchcaselaw/details?id=187414&type=caselaw&keyword=null" target="_blank">2025-TIOL-33-SC-GST </a></strong></em></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#DFF3CB" span="span"><em>As already noted, the aforesaid cases initially filed before this Court are of the Assessees and not of the Department. In the circumstances, we find that the impugned order passed by the High Court in R/SCA No. 10504/2023 would not call for any interference. Hence, the Special Leave Petition is dismissed. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, the High Court's order in the Yasho case is UPHELD, which means that the amount of pre-deposit to be made at the time of appeal can be paid from the Electronic Credit Ledger. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The understanding was/is that the money in the Electronic Credit Ledger can be used for making the huge mandatory deposits under the GST laws. Logically and logistically, it sounds good too. But remember, the Orissa High Court held otherwise. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2025/04062025.PNG" width="379" height="264" align="left">If credit is available in the credit ledger, what is the problem in allowing it to be used for pre-deposit? Or why should a taxpayer pay cash when credit is available in his account? And if tax can be paid from the credit ledger, why not deposit, which is after all a temporary payment and the taxpayer can claim refund if he wins the case, which he would in most cases. After all, credit is also money already paid to the government. Well, that is the trick - the money in your credit account is already with the government and must have already been spent. For our welfare, the government needs more money and how will more money come if audacious assessees choose to file appeals and use the credit for pre-deposit? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, there should be no doubt that what we call pre-deposit is actually the tax and so can be paid from the electronic credit register. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is it final or can we expect another retrospective amendment soon? Of course, the Supreme Court has to decide the cases of <em>Shiv Crackers</em> and <em>Flipkart Internet</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, in <em>Dell International Services India Pvt Ltd Vs Commissioner of Central Tax <strong> - <a href="https://taxindiaonline.com/searchcaselaw/details?id=145118&type=caselaw&keyword=null" target="_blank">2019-TIOL-286-CESTAT-BANG</a></strong></em>, the CESTAT allowed pre-deposit in a <strong>service tax</strong> case to be made from<strong> CGST</strong> Credit observing, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>After considering the submission of the learned counsel, we find that the appellants have reversed 7.5% of the duty demand through the CGST Credit and the same is indicated in the Column 4B(2) of the GSTR-3B filed for the month of August 2018. The learned AR also accepted the legal position that mandatory pre-deposit can be made through the CGST Credit. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the pre-deposit for a service tax appeal can be paid from CGST credit, why can't the pre-deposit for a GST appeal be made from CGST Credit Ledger? </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until next week</font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Comments/feedback welcome at <a href="mailto;vijaywrite@tiol.in">vijaywrite@tiol.in</a> or 9848111243 (WhatsApp) </font></strong></p> </body> </html>