Calcutta HC allows 10% pre-deposit for GST appeals due to court delay

Maa Sunaina Construction Private Limited v Union of India (Patna High Court)

In the case of Maa Sunaina Construction Private Limited v Union of IndiaThe Calcutta High Court has addressed the issue of pre-filing requirements for filing an appeal before the Goods and Services Tax (GST) Tribunal. Under Section 112 of the Central Goods and Services Tax Act, 2017, taxpayers must deposit a percentage of the disputed tax amount before appealing to the court. Initially, this pre-deposit was set at 20%, but a recent amendment reduced it to 10%. However, this change only comes into effect from November 1, 2024 and the GST Tribunals are yet to be constituted. Meanwhile, the Court ruled that the petitioner is entitled to a stay of recovery after paying 10% of the disputed tax amount until the court is operational.

The Court emphasized that taxpayers should not be penalized for the government’s failure to establish the GST Tribunal. He ordered that after payment of the required 10% deposit, recovery actions be suspended. However, once the tribunal is constituted, the applicant must appeal within the prescribed time limit. If the applicant chooses not to appeal, the authorities can proceed with recovery measures. The court also ordered the release of any bank account garnishment if the taxpayer meets the 10% deposit condition. The move provides temporary relief to taxpayers awaiting the establishment of GST tribunals.

FULL TEXT OF THE PATNA HIGH COURT JUDGMENT/ORDER

An amendment has been made to article 112 of the Central Goods and Services Tax Act, 2017 by replacing the pre-deposit with “twenty percent” “ten percent” to maintain an appeal before the Goods and Services Tax Tribunal. The Tribunal is yet to be constituted and this Court has passed orders based on the judgment in SAJ Food Products Pvt. Ltd. v. State of Bihar and Others in CWJC Case No. 15465 of 2022, authorizing the assessee to deposit twenty percent of the disputed tax amount, till the Tribunal is constituted and a appeal be filed also authorizing the suspension of recovery.

2. Currently, the pre-deposit has been reduced to “ten percent”, however, it is only effective from 01.11.2024. It is admitted that the GST Tribunals have not yet been constituted and there is no possibility of appeal before 01.11.2024. In such circumstances, we direct that the assessee, after payment of “ten per cent” of the tax amounts in dispute, shall be entitled to stay the recovery till the Tribunal is constituted and an appeal is taken. filed within the time limit provided herein.

3. This Court is therefore inclined to decide the present writ petition in the following terms:-

(i) Subject to the deposit of an amount equal to 10 percent of the amount of tax in dispute, if not already done, in addition to the amount previously deposited under paragraph (6) of section 107 of the BGST Act, the applicant must be extended the legal benefit of stay under paragraph (9) of Section 112 of the BGST Act. The applicant cannot be deprived of this advantage, due to the non-constitution of the Tribunal by the respondents themselves. Recovery of the balance as well as all steps that could have been taken in this regard will then be deemed suspended.

(ii) The legal measure of suspension, upon deposit of the legal amount, cannot, however, in the opinion of this Court, be unlimited. Therefore, to balance the equities, this Court is of the view that since the order is passed due to non-constitution of the Tribunal by the respondent authorities, the petitioner would be required to present/file his appeal under the Article 112 of the BGST. Act, once the Tribunal is constituted and made functional and the President or the President of the State can take office. The appeal must be filed in compliance with legal requirements after the establishment of the Tribunal, in order to facilitate the consideration of the appeal.

(ii) In case the petitioner chooses not to appeal by filing an appeal under Section 112 of the BGST Act before the Tribunal within such time as may be specified while constituting the Tribunal, the respondent authorities would be free to pursue this matter further, in accordance with the law.

(iv) If the above order is complied with and a sum equivalent to 10 percent of the remaining amount of tax in dispute is paid, then, in the event of attachment of the bank account of the applicant pursuant to the demand, the even will be released.

4. With the above liberty, observation and directions, the writ petition stands disposed of.