Appellant Not Required To Deposit 10% Of Entire Disputed Amount Including Penalty, Fine, Interest: Karnataka High Court

The Karnataka High Court has set aside the order passed by the Appellate Authority to deposit 10% of the entire amount in dispute, which included tax, interest, a fine, a fee, and a penalty.

The bench of Justice Sachin Shankar Magadum has observed that while filing the appeal under Section 107(6) of the GST Act, the appellant is required to deposit only 10% of the disputed tax amount and not 10% of the entire disputed amount, including penalty, fine, and interest.

The appellate authority, while examining the maintainability of the appeal under Section 107(6) of the GST Act, 2017, has declined to admit the appeal. The appellate authority noted that the petitioner has failed to comply with the mandate of pre-deposit and, therefore, has declined to admit the appeal filed by the petitioner under Section 107(6) of the CGST Act.

The petitioner/assessee contended that the order of the appellate authority calling upon the petitioner to deposit 10% of Rs. 1,41,11,633 was without jurisdiction. Therefore, the order is in disregard of Section 107(6) of the CGST Act.

The petitioner has challenged the entire demand confirmed in the confiscation order. The expression “tax in dispute” provided under Section 107(6) of the CGST Act does not include interest, penalty, fine, or fee. As per Section 107(6) of the CGST Act, a deposit of 10% of the disputed tax amount means only the tax amount and not the entire composite amount comprising tax, fine, penalty, and fee.

The department contended that the petitioner, by questioning the pre-deposit quantum, is virtually seeking to defeat the provisions of the appeal. Since the petitioner is disputing the claim of the enforcement officer in its entirety, he is bound to pay 10% of the entire amount determined by the enforcement officer.

The court noted that there is no need for the petitioner to deposit any percentage of the disputed interest, fine, fee, or 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.

The court has held that an order passed by the appellate authority calling upon the petitioner to pre-deposit 10% of Rs. 1,41,11,633 is set aside. Since the petitioner has already deposited 10% of the tax liability, which is to the tune of Rs. 67,200, the appellate authority is directed to admit the appeal and decide the same in accordance with the law.

Counsel For Petitioner: Adv. Sameer Gupta assisted by Adv. Gayatri S.R.

Counsel For Respondent: AGA Shivaprabhu.S.Hiremath

Case Title: M/S Tejas Arecanut Traders Versus Joint Commissioner Of Commercial Taxes

Case No.: Writ Petition No. 104505 Of 2023 (T-Res)

Click Here To Read The Order