GST: Output Tax cannot be equated to the pre-deposit required to be made in terms of Section 107(6) of the OGST Act

High Court of Orissa: “Output Tax”, as defined under Section 2(82) of the OGST Act cannot be equated to the pre-deposit required to be made in terms of Section 107 (6) of the OGST Act.

M/s Jyoti Construction vs Deputy Commissioner of CT & GST, Barbil Circle, Jajpur and another; W.P.(C) Nos.23508, 23511, 23513, 23514 and 23521 of 2021; HIGH COURT OF ORISSA; Cuttack;07.10.2021

The five matters arise out of a common set of facts and are disposed of by the common order. All the writ petitions challenge order dated 28.04.2021 passed by the Additional Commissioner of Sales Tax (Appeal), Central Zone, Odisha (Opposite Party No.2) rejecting the appeal filed by the Petitioner under Section 107 (1) of the Odisha Goods and Services Tax Act, 2017 (OGST Act) and holding that the appeals filed are defective since the Petitioner herein had made payment of the pre-deposit being 10% of the disputed amount under the IGST, CGST and SGST by debiting its electronic credit ledger (ECRL) and did not pay it from the electronic cash ledger (ECL) and furnished the proof of payment of the mandatory pre-deposit and that this was in contravention of Section 49(3) of the OGST Act read with Rule 85 (4) of the OGST Rules, 2017.

Facts and issue:

• The Petitioner is a partnership firm engaged in the business of execution of works contract including civil, electrical and mechanical.
• In the instant case for each of the above periods, a demand was raised by the Deputy Commissioner of CT & GST, Barbil Circle, Jajpur, Odisha (Opposite Party No.1) which resulted in an extra demand for IGST, CGST and OGST inclusive of interest.
• An appeal was filed in Form-GST APL01 before the appellate authority i.e. Opposite Party No.2 under Section 62 (1) of the OGST Act read with Rule 100 (1) of the OGST Rules. This was filed electronically.
• In terms of Section 107 (6) of the OGST Act, the Petitioner was required to make payment equivalent to 10% of the disputed amount of tax arising from the order against which the appeal is filed.
• This payment was required to be made by the Petitioner by debiting its ECL as provided under Section 49(3) read with Rule 85 (4) of the OGST Rules.
• According to the Department, this liability of pre-deposit could be discharged only by debiting the ECL. However, it was noticed that the Petitioner sought to make payment of the pre-deposit by debiting the ECRL.
• Considering this to be defective and liable for rejection of the appeal, a show cause notice (SCN) was issued on 25th January 2021 and 17th February, 2021.

Petitioner’s contention:

• Under Section 49 (4) of the OGST Act, the amount available in the ECRL could be used for making “any payment towards output tax” under the OGST Act or the IGST Act “in such manner and subject to such conditions and within such time as may be prescribed”.
• Under Rule 85 (4) of the OGST Rules, the amount deducted under Section 51, or collected under Section 52, or the amount payable on reverse charge basis, or; the amount payable under Section 10, or any amount payable towards interest, penalty, fee or “any other amount under the Act” shall be paid by debiting the ECL (i.e. the cash ledger) maintained under Rule 87 and the electronic ledger liability register (ELR) shall be credited accordingly.
• It is submitted by Petitioner that on a collective reading of the above Rules, the pre-deposit could be made by debiting the ECRL. Mr. Roy refers to the definition of “Output Tax” under Section 2 (82) of the OGST Act which means “tax chargeable under this Act on taxable supply of goods or services or both” made by the taxable person or his agent but excludes tax payable on reverse charge basis.
• On this basis, it is contended that since what in effect be the Petitioner was paying was a percentage of the output tax as defined under Section 2(82) of the OGST Act, the amount could well be paid by debiting the ECRL.

Observations and findings:

• The Court was unable to find any error having been committed by the appellate authority in rejecting the Petitioner’s contention that the ECRL could be debited for the purposes of making the payment of pre-deposit.
• It is not possible to accept the plea of the Petitioner that “Output Tax”, as defined under Section 2(82) of the OGST Act could be equated to the pre-deposit required to be made in terms of Section 107 (6) of the OGST Act. Further, as rightly pointed out by Mr. Mishra, learned ASC, the proviso to Section 41 (2) of the OGST Act limits the usage to which the ECRL could be utilised. It cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of Section 107 (6) of the OGST Act. It is not therefore possible to accept the plea Section 107 (6) of the OGST Act is merely a “machinery provision”.
• It is not possible in the present case to equate the output tax payable to the amount of predeposit required to be made. There is world of difference between an amount which is refundable and an amount which is liable to be paid as output tax. Here there is no amount refundable to the Petitioner which could be utilized for making of payment of the pre-deposit.
• The prayer of the Petitioner that the debiting of the ECRL made by it should be reversed is a separate cause of action for which the Petitioner should independently seek appropriate remedies in accordance with law. The making of the pre-deposit by the Petitioner is not contingent upon the above reversal of the debit entry in the ECRL.

Held:

For the aforementioned reasons, the Court finds no merit in these writ petitions and accordingly, the writ petitions are dismissed. But in the circumstances, there shall be no order as to costs.