10% GST pre-deposit obligation is confined to contested tax quantum excluding penalty, fee and interest [Read Judgement]

The Karnataka High Court in the matter of M/S TEJAS ARECANUT TRADERS Vs. JOINT COMMISSIONER OF COMMERCIAL TAXES has ordered that the 10% GST pre-deposit obligation be confined to the contested tax quantum, excluding penalty, fee and interest.

Relevant Text of the Judgment:

In the petition, the appellate authority, while examining the maintainability of the appeal under Section 107(6) of the Central Goods and Services Tax Act, 2017 (for short “CGST Act”) has declined to admit the appeal on the ground that the petitioner has failed to comply with the mandate of predeposit and therefore has declined to admit the appeal filed by the petitioner under Section 107(6) of the CGST Act.

The intentional exclusion of disputed interest, fine, fee, and penalty from sub-clause (b) of Section 107(6) of the CGST Act signifies a crucial legislative distinction. Analyzing this deliberate separation provides insights into the lawmaker’s clear intent regarding the nature and scope of the pre-deposit obligation in appeals. In legal interpretation, statutes are construed to give effect to the legislative intent. The absence of any reference to disputed interest, fine, fee, and penalty in sub-clause (b) suggests a meticulous legislative choice. If the intention were to impose a 10% pre-deposit on these consequential elements, the legislator could have explicitly included them in sub-clause (b).

By isolating “a sum equal to 10% of the remaining amount of tax in dispute” in sub-clause (b), the legislator conveys a focused pre-deposit requirement specifically related to the disputed tax amount. This implies that the legislative design prioritizes the financial commitment associated directly with the primary tax liability being contested.

This approach aligns with the legal principle that penalties, fines, fees, and interest are subsequent to the determination of tax. In essence, the legislative intent, as inferred from the wording of the provision, leans towards requiring a pre-deposit of 10% solely on the disputed tax amount, reflecting a clear understanding that these consequential elements are inherently linked to the imposition of tax and, therefore, do not warrant a separate pre-deposit under sub-clause (b).

The order under challenge is not sustainable. There is no need for the petitioner to deposit any percentage of the disputed interest, fine, fee and penalty arising from the impugned order. In essence, the legislative intent as construed from Section 107(6)(b) of the CGST Act is that the aggrieved party has to pre-deposit 10% of the tax liability, and it does not extend to penalties, fees or interest when the petitioner has contested the entirety of the tax liability.

Order:

1. The writ petition is allowed.

2. The impugned order passed by the appellate authority calling upon the petitioner to pre-deposit 10% of Rs.1,41,11,633 is hereby set aside.

3. Since the petitioner has already deposited 10% of the tax liability, which is to the tune of Rs.67,200, the appellate authority is hereby directed to admit the appeal and decide the same under the law.

For Official Judgment Download the PDF Given Below: