Case Note & Summary
The petitioner, a private limited company, filed a writ petition before the Bombay High Court challenging an order of the Appellate Authority under the Central Goods and Services Tax Act, 2017. The dispute arose from the dismissal of the petitioner's appeal for non-compliance with the mandatory pre-deposit requirement under Section 107(6) of the CGST Act. The Appellate Authority held that using Input Tax Credit to pay the 10% pre-deposit was not permitted and therefore the appeal was not validly instituted. The order was passed on 18 March 2025 without any prior notice or hearing to the petitioner on the issue of alleged non-compliance. Aggrieved, the petitioner approached the High Court because the GST Tribunal was not functioning, and thus the alternative remedy was not available. The petitioner contended that the impugned order violated natural justice and directly conflicted with the decision of the Bombay High Court in Oasis Realty vs. Union of India, which held that ITC could be used for pre-deposit. It was also argued that the Appellate Authority ignored the jurisdictional High Court precedent and instead relied on the Patna High Court decision in Flipkart Internet Pvt. Ltd. vs. State of Bihar, despite the Supreme Court having stayed paragraphs 77 and 78 of that decision. The respondents argued that the decision in Oasis Realty required reconsideration because it did not properly consider Section 49(4) of the CGST Act and Rule 86(2) of the CGST Rules, which restrict the use of the electronic credit ledger to payment of output tax only. The High Court observed that the impugned order could have been appealed to the GST Tribunal, but the Tribunal was admittedly not functioning, and therefore the writ petition was entertained. The Court further noted that the Appellate Authority passed the order without giving notice or hearing to the petitioner, which breached the principle of natural justice, and in such cases, the practice of exhausting alternate remedies is ordinarily not insisted upon. The Court found that the Appellate Authority's reliance on the Patna High Court decision, which had been stayed by the Supreme Court, was erroneous and that the jurisdictional High Court precedent in Oasis Realty was binding. Accordingly, the High Court allowed the writ petition, set aside the Appellate Authority's order dated 18 March 2025, and declared the petitioner's appeal validly instituted.
Headnote
A) Goods and Services Tax - Pre-Deposit for Appeal - Input Tax Credit can be used to satisfy mandatory pre-deposit under Section 107(6) of CGST Act - Central Goods and Services Tax Act, 2017, Section 107(6) - The Appellate Authority dismissed the appeal on the ground that using ITC to pay 10% pre-deposit was not permitted and did not satisfy Section 107(6). The High Court noted that the jurisdictional High Court in Oasis Realty vs. Union of India held otherwise, and the Patna High Court decision in Flipkart Internet Pvt. Ltd. was stayed by the Supreme Court. Held that the petitioner's appeal should not have been dismissed on that ground (Paras 3-5). B) Natural Justice - Right to Hearing Before Dismissal - Appeal cannot be dismissed for non-compliance with pre-deposit without notice and hearing - Central Goods and Services Tax Act, 2017, Section 107(6) - Before the impugned order was made, neither was any notice given nor was the petitioner heard on the issue of alleged non-compliance with the pre-deposit requirement, breaching the principle of natural justice. This breach also justified bypassing the alternate remedy. Held that writ petition is maintainable (Para 4). C) Writ Jurisdiction - Exhaustion of Alternate Remedy - When GST Tribunal is not functioning and there is breach of natural justice, writ petition under Article 226 is maintainable - Constitution of India, Article 226 - The impugned order could have been appealed to the GST Tribunal, but the Tribunal was admittedly not functioning. Moreover, the order was passed without notice or hearing. Held that in case of breach of natural justice, the practice of exhaustion of alternate remedies is ordinarily not insisted upon (Para 4). D) Precedent - Binding Effect of Jurisdictional High Court - Appellate Authority bound by Bombay High Court decision; cannot follow Patna High Court decision which has been stayed by Supreme Court - Central Goods and Services Tax Act, 2017, Section 107(6) - The Appellate Authority ignored the decision of the jurisdictional High Court in Oasis Realty and relied on the Patna High Court decision in Flipkart Internet Pvt. Ltd., whose relevant paragraphs were stayed by the Supreme Court. Held that the Appellate Authority's approach was erroneous and the impugned order must be set aside (Paras 5-6).
Issue of Consideration
Whether using Input Tax Credit to pay the 10% pre-deposit under Section 107(6) of the Central Goods and Services Tax Act, 2017 is permissible; whether the Appellate Authority's order dismissing the appeal without notice or hearing violates natural justice; whether the writ petition is maintainable despite the alternative remedy before the GST Tribunal.
Final Decision
The High Court allowed the petition, set aside the Appellate Authority's order dated 18 March 2025, and declared the petitioner's appeal validly instituted.
Law Points
- Input Tax Credit can be used to satisfy pre-deposit under Section 107(6) of CGST Act
- 2017
- Section 49(4) and Rule 86(2) do not prohibit use of electronic credit ledger for pre-deposit
- natural justice requires notice and hearing before dismissing appeal
- exhaustion of alternate remedy not insisted upon when there is breach of natural justice and GST Tribunal is not functioning
- jurisdictional High Court precedent is binding on appellate authority
- Supreme Court stay on Patna High Court decision must be respected
