M/S Aman Dairy vs. State Of U.P. And 2 Others

Facts

The petitioner, M/s Aman Dairy, filed an appeal before the Additional Commissioner, Grade-2 (Appeal)-I, Commercial Tax, Jhansi. The appeal was rejected because the mandatory pre-deposit of 10% was made through the electronic credit ledger, whereas the authority insisted it should have been from the cash ledger. The petitioner subsequently made the deposit through the cash ledger on 27.12.2021. The impugned order dated 31.03.2022, passed by the Additional Commissioner, Grade-2 (Appeal), State Tax/ Commercial Tax Judicial Zone, Bulandshahar for the financial year 2018-19 under Section 74(9) of the Goods and Services Tax Act, 2017, is under challenge.

Held

The Court held that the rejection of the appeal by the First Appellate Authority solely on the ground that the mandatory pre-deposit was made through the electronic credit ledger, instead of the cash ledger, was incorrect. The Court referred to the clarificatory circular dated 06.07.2022, which permits the utilization of the electronic credit ledger for such payments. The Court found that the pre-deposit had been made by the firm, and the Appellate Authority should not have insisted on a specific ledger for the deposit. The reasoning was that the substance of the compliance (making the deposit) was achieved, and the method should not be a bar to deciding the appeal on its merits. The ratio decidendi is that a pre-deposit made through the electronic credit ledger is a valid compliance for appellate purposes, especially when supported by a clarificatory circular, and appeals should be decided on merits rather than technicalities of deposit methods. The impugned order was set aside, and the First Appellate Authority was directed to decide the appeal on merit within one month.

Key Issues

1. Whether the mandatory pre-deposit of 10% for filing an appeal under the Goods and Services Tax Act, 2017, can be made through the electronic credit ledger, or if it must be made exclusively through the electronic cash ledger? Petitioner's contention: The petitioner argued that the pre-deposit was validly made through the electronic credit ledger. They relied on a clarificatory circular dated 06.07.2022, issued by the Government of India, which clarified that any payment towards output tax, including those payable as a consequence of proceedings, can be made by utilizing the amount available in the electronic credit ledger. The rejection of the appeal solely on the ground of the deposit method, without deciding the merits, was therefore incorrect. Respondent's contention: The learned Standing Counsel for the State did not record any specific arguments against the petitioner's claim regarding the mode of pre-deposit. The judgment indicates that the respondent did not contest the petitioner's reliance on the circular or the subsequent deposit.