Recovered electronic credit ledger amounts may be adjusted toward statutory pre-deposit, warranting restoration of the appeal.

The petitioner-company, engaged in the business of automatic data-processing machines and their units, received a scrutiny intimation in Form GST ASMT-10 concerning alleged irregular utilisation of input tax credit (“ITC”) for the financial year 2018–2019.

A subsequent Form GST DRC-01A proposed demands relating, inter alia, to the difference between GSTR-2A and GSTR-3B, substantial utilisation of ITC for payment of output tax, and purchases from suppliers whose registrations had allegedly been cancelled.

An order under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) confirmed the demand, interest and penalty on 25 March 2022.

The petitioner filed an appeal in Form GST APL-01 under Section 107 of the CGST Act on 12 July 2022 and sought waiver of the pre-deposit on account of financial hardship. The appellate authority dismissed the appeal on 30 April 2025 for non-payment of the mandatory pre-deposit under Section 107(6).

Thereafter, the respondents appropriated amounts available in the petitioner’s electronic ledger towards the outstanding demand and issued a Form GST DRC-13 notice to the petitioner’s banker under Section 79(1)(c) of the CGST Act.

Before the High Court, the petitioner did not press its claim for refund of the excess amount, but sought adjustment of the amount already recovered towards the statutory pre-deposit so that its appeal could be heard on merits.

1. Whether the amount already recovered from the petitioner’s electronic ledger could be adjusted towards the mandatory 10% pre-deposit required for maintaining an appeal under Section 107(6) of the CGST Act?

2. Whether the appellate order dismissing the petitioner’s appeal for non-payment of pre-deposit ought to be quashed and the appeal restored for decision on merits in the peculiar facts of the case?

Section 107(6)(b) of the CGST Act requires payment of the prescribed percentage of the tax in dispute as a condition for maintaining an appeal before the appellate authority.

The Court relied on M/s. Shiv Crakers v. Chief Commissioner of CGST & C.E. & Anr., 2024 (3) TMI 832, which held that the amount available in an assessee’s electronic credit ledger may be utilised towards the statutory 10% pre-deposit and that an appeal dismissed for non-payment could be restored.

The Court also relied on Oasis Realty v. Union of India, Writ Petition No. 23507 of 2022, decided by the Bombay High Court on 16 September 2022, and the CBIC Circular dated 6 July 2022 concerning payment of appellate pre-deposit through the electronic credit ledger.

The Court exercised its writ jurisdiction to grant relief in the peculiar circumstances, while directing that the order should not be treated as a precedent.

The Court noted that the amount recovered by the respondents exceeded the statutory pre-deposit of Rs.44,41,331.40, representing 10% of the disputed tax amount.

Although the State contended that the petitioner had not sought such adjustment before the appellate authority and had failed to comply with Section 107(6), the Court applied the principle recognised in Shiv Crakers that an amount standing to the taxpayer’s credit could be utilised towards the appellate pre-deposit.

Since the petitioner expressly abandoned its claim for refund of the excess recovery and sought only adjustment of the requisite amount, the Court treated the case as an exceptional one involving financial hardship.

It therefore considered that dismissal of the appeal solely for non-payment of pre-deposit should not prevent adjudication of the substantive tax dispute on merits.

It directed the respondents to restore the appeal to its original file within two weeks of uploading the judgment and directed that the required 10% pre-deposit under Section 107(6)(b)—Rs.44,41,331.40, or such amount as determined by the appellate authority—be adjusted against the amount already recovered from the petitioner’s electronic ledger.

The appellate authority was directed to decide the appeal on merits, with all contentions left open. The Court clarified that the order was passed in the peculiar facts of the case and would not operate as a precedent.