Navnit Motors PVT LTD vs. Commissioner Of CGST And Central Excise, (Appeals Iii), Mumbai

Facts

The Petitioner, Navnit Motors Pvt. Ltd., filed a writ petition challenging an order dated March 18, 2025, passed by the Commissioner of CGST & Central Excise (Appeals-III), Mumbai. The Appellate Authority dismissed the Petitioner's appeal on the grounds that using Input Tax Credit (ITC) to pay the 10% pre-deposit required under Section 107(6) of the CGST Act, 2017, was impermissible. The Petitioner argued that the Appellate Authority's order violated principles of natural justice as no notice was given regarding the alleged non-compliance, and it disregarded the jurisdictional High Court's decision in Oasis Realty vs. Union of India & Ors. The Petitioner also highlighted that the Appellate Authority relied on a Patna High Court decision that was subject to a stay order from the Supreme Court. The GST Tribunal was not functioning, necessitating the writ petition.

Held

The Court held that the Appellate Authority's order dated March 18, 2025, was unsustainable. The Court found that the Petitioner's appeal was dismissed without affording them an opportunity to be heard on the issue of pre-deposit compliance, thus violating the principles of natural justice. Furthermore, the Appellate Authority erred by ignoring the binding decision of this Court in Oasis Realty vs. Union of India & Ors., which held that ITC could be used for pre-deposit. The Court also noted that the Appellate Authority relied on a Patna High Court decision whose operative paragraphs had been stayed by the Supreme Court, a fact that was also ignored. The Court rejected the Revenue's contention for reconsideration of Oasis Realty, noting that the relevant provisions were considered and the judgment was not challenged before the Supreme Court. The Court quashed the impugned order and restored the Petitioner's appeal to the Appellate Authority for adjudication on merits, directing the Appellate Authority to dispose of the appeal in accordance with law, specifically in light of the Oasis Realty decision confirming compliance with the pre-deposit requirement. All contentions on the merits of the matter were left open.

Key Issues

1. Whether the Appellate Authority's order dismissing the Petitioner's appeal for using Input Tax Credit (ITC) to pay the 10% pre-deposit under Section 107(6) of the CGST Act, 2017, is violative of the principles of natural justice and the binding precedent of this Court? Petitioner's Arguments: - The order violates natural justice as no notice was issued to the Petitioner regarding the alleged non-compliance with the pre-deposit requirement. - The Appellate Authority erred by ignoring the Division Bench decision of this Court in Oasis Realty vs. Union of India & Ors. - The Appellate Authority wrongly relied on the Patna High Court's decision in Flipkart Internet Pvt. Ltd. vs. State of Bihar & Ors., which had its relevant paragraphs stayed by the Supreme Court. - The Petitioner had complied with the pre-deposit requirement as per the Oasis Realty judgment. Revenue's Arguments: - The decision in Oasis Realty (supra) needs reconsideration as it did not sufficiently consider Section 49(4) of the CGST Act and Rule 86(2) of the CGST Rules. - Section 49(4) permits ITC usage only for output tax, and pre-deposit for appeal maintainability is not a 'tax liability' under Section 49(2). - The Supreme Court's stay order on the Patna High Court decision was ex-parte, and the matter is still pending.