The Hon’ble High Court of Bombay vide its order dated 16.09.2022 in the matter of OASIS Reality, Roma Builders Pvt. Ltd. Vs. Union of India & Others in WRIT PETITION (ST) NO. 23507 OF 2022 WITH WRIT PETITION (ST) NO. 12287 OF 2022 WITH WRIT PETITION (ST) NO. 12457 OF 2022, held that the amount/credit available in the Electronic Credit Ledger can be utilised for making pre-deposit of 10% of the ‘Tax in dispute’ for filing the appeal, as prescribed under sub section (6) of Section 107 of the MGST Act.

The case of the petitioner is that 10% of the ‘Tax in dispute’ required to be paid in terms of Section 107(6) of the MGST Act, for the purpose of filing an appeal, can be made by utilizing the credit available in the Electronic Credit Ledger.

The case of the Revenue is that the appellant can utilize the credit available in the Electronic Cash Ledger not Electronic Credit Ledger.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the law applicable, took the Writ Petition (St) No. 23507 of 2022 as lead petition and found that issue involved in the present petition is ‘Whether, an Appellant, to comply with the requirements of Sub-section 6 of Section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST 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 utilising the credit available in the Electronic Credit Ledger?’
• The Hon’ble Court after perusal of sub section (1), (6) and (7) of the Section 107 (Appeals to Appellate Authority) of the MGST Act as well as Section 49 (Payment of tax, interest, penalty and other amounts) of the Act, and Section 2(82) (Output Tax), found that Section 107(6) mandates that before the party files an appeal, it has to pay such part of the amount of tax, interest & penalty, which has been admitted by it. This situation would arise where the part of the order has been accepted and rest is not accepted.  It will not arise in a situation where the entire order is admitted because the party may then not want to file an Appeal.
• That sub section (6) of Section 107 deals with such part of the impugned order which is not admitted, the Appellant in order to file an appeal has to pay the 10% of the remaining ‘Tax in dispute’ for the purpose of filing the appeal. It is important to note, it does not say anything about ‘interest, fine, fee or penalty’.
• It was found by the Hon’ble Court that on comparing clause ‘a’ & ‘b’ of sub-section (6) of the Section 107, it can be seen that where there is admission of the part of order with respect to tax, interest, fine, fee and penalty, all those amounts have to be deposited first, and for the part which is not admitted only 10% of the tax in dispute has to be deposited. The deposit will not include the interest, fine, fee and penalty mentioned in the impugned order, and the same was explained by the Hon’ble Court by giving an illustration.
• It was noted by the Hon’ble Court that the expression used in sub-section (6) of Section 107 is, “unless the Appellant has paid”. It is a precondition to filing an Appeal. The expression used is “paid” and not “deposited”.
• The Hon’ble Court while considering the clauses of Section 49, found that Sub-section (3) and Sub-section (4) of Section 49 provide how to use the amounts lying in the Electronic Cash Ledger and Electronic Credit Ledger, respectively. Sub-section (3) provides that the amount available in the Electronic Cash Ledger may be used for making any payment towards tax, interest, penalty, fee or any other amount payable under the provisions of this Act or rules made thereunder. Subsection (4) provides that the amount available in the Electronic Credit Ledger may be used for making any payment towards output tax under MGST (this) Act or under Integrated Goods and Services Tax (IGST) Act in such manner and subject to such conditions as may be prescribed from time to time.
• Further, sub section (5) of Section 49 says that ‘any amount of ITC available on account of integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards payment of central tax or State tax or as the case may be, even Union territory tax in that order. Clause (b) of Sub-section (5) says the amount of ITC available in the Electronic Credit Ledger on account of the central tax shall first be utilised towards payment of central tax and the amount remaining may be utilised for payment of integrated tax. Clause (c) of Sub-section (5) provides that the amount of ITC available in the Electronic Credit Ledger on account of the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, shall be utilised towards payment of integrated tax. Similarly, clause (d) provides for the utilisation for the Union Territory tax’.
• It was noticed by the Hon’ble Court that” the case of the respondents is that sub-section (4), the credit in the Electronic Credit Ledger cannot be utilized for payment of tax under clause (b) of sub-section (6) of Section 107, however it can be used for payment of output tax under MGST or under IGST.
• It was found by the Hon’ble Court that sub-section (6) of Section 107 provides for a precondition “unless the appellant has paid” (not deposited) a sum equal to 10% of remaining amount of Tax in dispute”, and that tax can be Integrated Tax or Central Tax or the State Tax or Union Territory Tax in the present case. Therefore, 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.  Further in view of provisions of sub-section (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.
• 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. Therefore, any payment towards output tax, whether self-assessed in the return or payable as a consequence of any 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.
• The Hon’ble Court taking note of the decision of the High Court of Orissa in M/s Jyoti Construction Vs. Deputy Commissioner of CT & GST 2021 (10) TMI 524, relied upon by the respondents, ‘to submit 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’, found that it is necessary to discuss this order as subsequent to this order CBIC, in view of the representations received on utilisation of the amounts available in the Electronic Credit Ledger and the Electronic Cash Ledger for payment of tax and other liabilities, issued a circular No.CBIC-20001/2/2022-GST dated 6th July 2022, clarifying that an amount towards output tax liability from any proceedings instituted under the GST laws can be paid by utilisation of the amount available in the Electronic Credit Ledger of a registered person. The CBIC has also requested that suitable trade notices be issued to publicize the contents of the circular.
• Lastly, the Hon’ble Court considering the submission made on the behalf of the petitioner & respondents that ‘this clarification would not apply to reverse charge mechanism’ found that in the present case the amounts payable is towards output tax. Therefore, it was held 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.

The Hon’ble Court with the above findings, set aside and quashed the impugned Order-in-Appeal No. JC/APP-V/GST Defective/A.F.Y/2021-22/A.O.Y..2022- 23/-B-1 dated 6th April, 2022 and FORM GST APL-02­. The Appeal is restored to file on the undertaking of Petitioner that it shall debit the Electronic Credit Ledger within one week of this order getting uploaded towards this 10% payable under Section 107(6)(b), if not already debited, is accepted.  Further in view of the order passed in the Writ Petition (ST) 23507 of 2022, the orders dated 21st March, 2022 impugned in Writ Petition (ST) No.12287 of 2022 and Writ Petition (ST) No.12457 of 2022 are also quashed and set aside with the same direction mentioned above.

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