The Bombay High Court in the case of NAVNIT MOTORS PVT. LTD. VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE, (APPEALS-III), MUMBAI & ANR. Vide WRIT PETITION NO. 2345 OF 2025 dated 14.07.2025, reinforces the principle that binding precedents of jurisdictional High Courts must be followed and any departure without hearing the affected party violates natural justice. Further, the Court provides relief to taxpayers who have utilized ITC for mandatory pre-deposits, upholding the position taken in Oasis Realty and ensuring administrative discipline among appellate authorities.

Facts of the Case: In this case, the petitioner challenged the order dated 18 March 2025 passed by the Appellate Authority, which dismissed the petitioner’s appeal solely on the ground that the mandatory 10% pre-deposit required under Section 107(6) of the CGST Act, 2017 was not paid in cash but was discharged using Input Tax Credit (ITC).

The Appellate Authority relied on the Patna High Court’s decision in Flipkart Internet Pvt. Ltd. v. State of Bihar (2023), which held that ITC could not be used for pre-deposit compliance, and that it must be paid in cash via the Electronic Cash Ledger (ECL).

The Petitioner relied on the jurisdictional High Court’s decision in Oasis Realty v. Union of India (2022), which allowed ITC utilization for the 10% pre-deposit. The Petitioner alleged violation of natural justice, as no notice was issued nor an opportunity to be heard was granted before the dismissal on the ground of improper pre-deposit. It was also highlighted that the Supreme Court had stayed relevant portions (paragraphs 77 and 78) of the Patna High Court’s decision in Flipkart Internet Pvt. Ltd. that restricted ITC use for pre-deposit.

Issue: Whether Input Tax Credit can be utilized for fulfilling the requirement of 10% pre-deposit under Section 107(6) of the CGST Act for filing an appeal. Whether the Appellate Authority’s action of dismissing the appeal without issuing notice or hearing the petitioner constitutes a violation of principles of natural justice.

Held that:

The Court held that the Appellate Authority acted in breach of natural justice by not issuing notice or hearing the petitioner before rejecting the appeal for non-compliance with Section 107(6). As per judicial discipline, notice must be given especially where alternate interpretations of law exist.   

The Court referred the judgment in the case of Oasis Realty, which allows utilization of ITC for pre-deposit under Section 107(6), was binding on the Appellate Authority. Thus, the Authority erred by relying on the Patna High Court’s contrary view, particularly when it was not binding in Maharashtra and the Supreme Court had stayed the relevant portions of the Patna HC ruling. The stay by the Hon’ble Supreme Court, even though ex-parte, remains binding and undermines the Patna High Court’s observations which the Appellate Authority chose to follow.

The Court held that the Appellate Authority acted contrary to judicial discipline by disregarding the binding precedent of the Bombay High Court in Oasis Realty v. UOI, which had categorically held that ITC can be used to satisfy the 10% pre-deposit under Section 107(6).

The Court quashed and set aside the impugned order. The petitioner’s appeal was restored to the file of the Appellate Authority. The Appellate Authority was directed to decide the appeal afresh on merits, treating the ITC utilization as valid pre-deposit as per Oasis Realty.

To read the complete judgment 2025 Taxo.online 1527