Introduction:

The Karnataka High Court recently delivered a significant judgment setting aside an order by the Appellate Authority concerning the pre-deposit requirement in a Goods and Services Tax (GST) appeal. The bench, led by Justice Sachin Shankar Magadum, clarified the scope of pre-deposit under Section 107(6) of the CGST Act, emphasizing the specific amount to be deposited while filing an appeal.

Parties’ Arguments:

In the case of M/S Tejas Arecanut Traders versus Joint Commissioner Of Commercial Taxes, the petitioner contended that the demand confirmed in the confiscation order was challenged entirely. They argued that the term “tax in dispute” under Section 107(6) of the CGST Act referred solely to the disputed tax amount and did not encompass interest, penalty, or fines.

Conversely, the department argued that challenging the pre-deposit quantum implied an attempt to undermine the appeal’s provisions. They claimed that contesting the enforcement officer’s entire claim necessitated a 10% deposit of the entire determined amount, including penalties, fees, and interest.

Court’s Judgement:

The Karnataka High Court clarified that under Section 107(6)(b) of the CGST Act, the petitioner was required to pre-deposit only 10% of the disputed tax liability. The court highlighted that this provision did not extend to penalties, fees, or interest when the appellant contested the entirety of the tax liability.

Consequently, the order directing the petitioner to deposit 10% of the total amount, including fines, penalties, and interest, was set aside. As the petitioner had already deposited 10% of the tax liability (Rs. 67,200), the Appellate Authority was instructed to admit the appeal and proceed in accordance with the law.