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2025 (5) TMI 765 - HC - GSTRejection of appeal basing on noncompliance of pre-deposit as per sub-section (6) of Section 107 of the CGST Act 2017 - HELD THAT - On perusal of the impugned order dated 05.12.2024 (paragraph-6) it is revealed that the Appellate Authority has taken note of furnishing documents along with appeal and he found that no evidence was available on record with regard to pre-deposit. It is required to be complied with as per sub-section (6) of Section 107 of the CGST Act. Except the said pre-deposit the appeal was otherwise defect-free. It is undeniable that the Appellate Authority proceeded to hear the matter on merit having ignored such a statutory requirement. However it is no contested by the learned Senior Standing Counsel that the appeal was heard on merit and no intimation was given to the Petitioner with regard to non-compliance of requirements under subsection (6) of Section 107. The learned Senior Advocate fairly conceded that had the Appellate Authority pointed out such a defect the petitioner would have deposited such amount as is required for the purpose of appeal to be heard on merit. This Court therefore feels it expedient to observe that when the appeal is admitted and the Appellate Authority is proceeded to hear the matter on merit the Office of the Appellate Authority should have brought to the notice of the Petitioner with regard to defect in filing of appeal much prior to issue of notice of hearing. Having not done so the Appellate Authority proceeded to hear the matter on merit. Therefore the Petitioner was not afforded proper opportunity. Having not intimated the Petitioner with regard to defect even though it is admitted that the appeal was admitted for hearing due to inadvertence there is violation of principles of natural justice. This Court sets aside the impugned order dated 05.12.2024 passed by the Additional Commissioner GST (Appeals) and direct the Petitioner to deposit the requirement under Section 107(6) of the CGST Act within five days hence - Petition disposed off.
Issues Presented and Considered
The core legal questions considered by the Court are:
Issue-wise Detailed Analysis Issue 1: Validity of Rejection of Appeal on Ground of Non-Compliance with Pre-Deposit Requirement After Hearing on Merits The legal framework relevant to this issue is Section 107(6) of the CGST Act, 2017, which mandates that a pre-deposit of a specified amount must be made by the appellant at the time of filing an appeal before the Appellate Authority. Rule 108 of the CGST Rules further elaborates the procedural requirements for filing appeals, including the necessity of pre-deposit. Precedents in GST jurisprudence emphasize strict compliance with statutory requirements for filing appeals, including pre-deposit, as a condition precedent for entertaining the appeal. However, the Court noted that in the present case, the Appellate Authority proceeded to hear the appeal on merits despite the absence of proof of pre-deposit, effectively admitting the appeal. The Court observed that the Appellate Authority, after conducting the hearing and considering submissions on merits, rejected the appeal solely on the ground of non-compliance with Section 107(6) by not furnishing the pre-deposit. The Court found this approach legally untenable because the appellant was not given prior notice or an opportunity to rectify the defect before the hearing commenced. The Court reasoned that once the appeal has been admitted and heard on merits, it is improper to dismiss the appeal on a technical ground of pre-deposit non-compliance without affording the appellant an opportunity to cure the defect. This procedural lapse amounted to a denial of due process. Issue 2: Violation of Principles of Natural Justice The principles of natural justice require that a party be given a fair opportunity to present its case and be informed of any defects or deficiencies that might affect the adjudication. The Court found that the Appellate Authority failed to notify the appellant of the defect regarding the pre-deposit requirement before proceeding with the hearing. The Court emphasized that the Appellate Authority should have pointed out the defect much prior to the notice of hearing, thereby enabling the appellant to comply with the statutory requirement. The absence of such intimation resulted in a violation of natural justice, as the appellant was deprived of an opportunity to remedy the defect and have the appeal heard on merits without technical impediments. The Court noted the concession by the learned Senior Advocate for the appellant that had the defect been pointed out, the appellant would have complied with the pre-deposit requirement. Issue 3: Grant of Opportunity to Cure Defect by Making Pre-Deposit Post-Hearing Given the peculiar factual matrix where the appeal was heard on merits without prior notice of defect, the Court considered whether it would be appropriate to allow the appellant to deposit the requisite amount post-facto. The Court observed that in the interest of justice and to uphold the appellant's right to be heard, it was expedient to grant a limited time for compliance with Section 107(6). The appellant was accordingly granted five days to make the pre-deposit. The Court directed that upon such deposit being made, the Appellate Authority must consider the compliance and proceed to hear the appeal in accordance with law, ensuring the appellant is informed of the hearing dates. This approach balances the need for procedural compliance with fairness and avoids undue hardship caused by technical dismissal. Issue 4: Interpretation and Application of Section 107(6) of the CGST Act and Rule 108 of the CGST Rules Section 107(6) of the CGST Act imposes a mandatory pre-deposit requirement for filing appeals before the Appellate Authority, and Rule 108 prescribes the procedural modalities. The Court acknowledged the statutory mandate but clarified that strict enforcement must be tempered with procedural fairness. The Court underscored that the statutory requirement is intended to ensure compliance and discourage frivolous appeals, but not to cause injustice through rigid application without affording reasonable opportunity to comply. The Court's interpretation emphasizes that non-compliance with pre-deposit requirements should be addressed by giving notice and opportunity to cure before rejecting an appeal, especially where the appeal has already been admitted and heard on merits. Significant Holdings The Court held:
The core principles established are:
On the facts, the Court set aside the impugned order dismissing the appeal and directed the appellant to deposit the pre-deposit amount within five days. Upon such compliance, the Appellate Authority was directed to proceed with the appeal hearing in accordance with law.
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