Tejas Arecanut Traders vs Joint Commissioner pf Commercial Taxes (Appeals), Hubli

The expression “pre-deposit of 10% of the tax in dispute” refers to a legal requirement where, during the adjudication process, a petitioner is obligated to make a pre-deposit equal to 10% of the tax amount that is being contested. This pre-deposit is a financial commitment made by the petitioner before the resolution of the dispute.

A significant clarification has been made by the Karnataka High Court, specifying that the 10% pre-deposit should be calculated based solely on the disputed tax amount and not on the total amount mentioned in the order, which may include tax, interest, and penalties.

The court emphasized that penalties, fees, and interest are outcomes of the determination of the primary tax liability. Therefore, when a petitioner challenges the entire tax amount, the pre-deposit obligation remains focused on the contested tax itself.

It is crucial to understand that the legislative framework, specifically sub-clause (b) of Section 107(6) of the CGST Act, does not encompass disputed interest, fines, fees, and penalties within the scope of the 10% pre-deposit requirement. This deliberate omission suggests a careful legislative choice, highlighting that the pre-deposit obligation is specifically targeted at the contested tax amount, excluding other consequential elements.

In summary, the expression “pre-deposit of 10% of the tax in dispute” means that, during legal proceedings, a petitioner challenging a tax amount must make a pre-deposit equal to 10% of the contested tax, and this requirement does not extend to cover disputed interest, fines, fees, or penalties, as per the legislative intent outlined in the relevant section of the CGST Act.

2. In the captioned petition, the appellate authority while examining the maintainability of the
appeal under Section 107(6) of the Central Goods and Services Tax Act, 2017 (for short “CGST Act”) has declined to admit the appeal on the ground that petitioner has failed to comply the mandate of predeposit and therefore, has declined to admit the appeal filed by the petitioner under Section 107(6) of the CGST Act.

3. The learned counsel for the petitioner reiterating the grounds urged in the writ petition would contend that the order of the appellate authority calling upon the petitioner to deposit 10% of Rs.1,41,11,633/- is one without jurisdiction and therefore, he would point out that the impugned order is in disregard to Section 107(6) of the CGST Act.

4. The counsel on record while referring to Section 107(6) of the CGST Act would contend that
petitioner has challenged the entire demand confirmed in the confiscation order and therefore, he would contend that the expression “tax in dispute” provided under Section 107(6) of the CGST Act does not include interest, penalty, fine and fee. While referring to the language of Section 107(6) of the CGST Act, he would contend that deposit of 10% of the disputed tax amount means only tax amount and not entire composite amount comprising tax, fine, penalty and fee. Therefore, he would vehemently argue and contend that the appellate authority has wrongly calculated pre-deposit of Rs.14,11,163/- which is 10% of total demand that is Rs.1,41,11,633/-. To substantiate his grounds, he has placed reliance on the judgment rendered by the High Court of Patna in the case of Carbon Resources (P) Limited .vs. The State of Bihar and others [Civil Writ Jurisdiction Case No.2412 0f 2023] as well as the judgment rendered by the High Court of Allahabad in the case of Durga Raj Vijay Kumar .vs. State of U.P.1 . Referring to these judgments, he would point out that appellate authority was not justified in
including other components while determining predeposit namely, fine, penalty and fees. He would further point out that confiscating Officer has determined tax at Rs.6,71,983/- and  petitioner has already deposited 10% of the tax already determined by the Enforcement Officer. 

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TEJAS ARECANUT TRADERS

For Reference Visit:
Karnataka High Court

Read Another Case Law:
GST Case Law