2022 (10) TMI 42 - HC - GST

Pre-deposit before filing of an appeal - Utilisation of credit available only in the Electronic Cash Ledger - 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? HELD THAT - 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. 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 - 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. Since in the present petitions the amounts payable are towards output tax it is 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 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) - petition disposed off.

Summary

Issues Involved:
1. Whether an appellant can utilize the credit available in the Electronic Credit Ledger to pay the sum equal to 10% of the amount of tax in dispute as required under Sub-section 6 of Section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act).

Issue-wise Detailed Analysis:

1. Requirement of Payment Before Filing an Appeal:
The court examined Sub-section (6) of Section 107, which mandates that before filing an appeal, the appellant must pay a sum equal to 10% of the disputed tax amount. This payment is a precondition for filing an appeal and does not include interest, fine, fee, or penalty. The court emphasized that the term used is "paid" and not "deposited," which is significant when considering the provisions of Section 49.

2. Provisions of Section 49:
The court analyzed various sub-sections of Section 49:
- Sub-section (1) details how deposits towards tax, interest, penalty, fee, or any other amount should be credited to the Electronic Cash Ledger.
- Sub-section (2) states that input tax credit (ITC) as self-assessed in the return should be credited to the Electronic Credit Ledger.
- Sub-sections (3) and (4) outline the usage of amounts in the Electronic Cash Ledger and Electronic Credit Ledger, respectively. Sub-section (4) restricts the use of the Electronic Credit Ledger to payments towards output tax under the MGST or IGST Acts.
- Sub-section (5) describes the order of utilization of ITC available in the Electronic Credit Ledger.

3. Utilization of Electronic Credit Ledger:
The court disagreed with the state's submission that the Electronic Credit Ledger could not be used to pay the 10% of the disputed tax under Sub-section (6) of Section 107. The court noted that the term "paid" in Section 107(6) allows for the use of ITC available in the Electronic Credit Ledger to meet this requirement. The court also referred to Sub-rule (2) of Rule 86 of MGST Rules and the definition of "output tax" in Clause (82) of Section 2 of MGST Act to support this interpretation.

4. CBIC Clarification:
The court considered a circular issued by the Central Board of Indirect Taxes and Customs (CBIC), which clarified that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding, can be made using the amount available in the Electronic Credit Ledger. This circular further supported the court's interpretation that the 10% of the disputed tax could be paid using the Electronic Credit Ledger.

5. Exclusion of Reverse Charge Mechanism:
The court acknowledged that the CBIC circular explicitly states that the Electronic Credit Ledger cannot be used for making payments under the reverse charge mechanism. However, since the amounts in question were towards output tax, this exclusion did not apply to the present case.

Conclusion:
The court concluded that the petitioner could utilize the ITC available in the Electronic Credit Ledger to pay the 10% of the disputed tax as required under Sub-section (6) of Section 107. Consequently, the impugned orders were quashed, and the appeals were restored with the direction that the petitioner should debit the Electronic Credit Ledger within one week of the order.

Final Orders:
The court quashed and set aside the impugned orders and restored the appeals on the condition that the petitioner debits the Electronic Credit Ledger for the required 10% of the disputed tax within one week. All petitions were disposed of with no order as to costs.