M/S Shah Arts Emporium vs. Union Territory Of J And K And Ors. (State Taxes Department)

Facts

The petitioner, M/s Shah Arts Emporium, filed a writ petition challenging an order dated 22.06.2023 passed by the Appellate Authority (Appeals II), States Taxes Department, Kashmir. The Appellate Authority refused to entertain the petitioner's appeal on the grounds that 10% of the disputed tax amount had not been deposited as required by Section 107 of the CGST Act, 2017. The petitioner contended that the required amount had indeed been deposited, evidenced by a receipt for Rs. 1,24,000/-, which was not considered by the Appellate Authority. The respondents, UT of J&K and Ors, acknowledged that if the amount was deposited, there would be no reason to refuse the appeal.

Held

The Court held that the Appellate Authority should hear the appeal on its merits. The reasoning was based on the petitioner's assertion, supported by a receipt for Rs. 1,24,000/-, that the required 10% of the disputed amount had been deposited. The Court found no valid reason for the Appellate Authority to refuse to entertain the appeal if this deposit was indeed made. Consequently, the impugned order dated 22.06.2023 passed by the Appellate Authority was set aside. The ratio decidendi is that a statutory appeal should not be dismissed for non-compliance with pre-deposit requirements if there is evidence of such compliance, and the Appellate Authority should verify such claims before rejecting the appeal. The operative direction was to set aside the impugned order and direct the Appellate Authority to hear the appeal on its merit.

Key Issues

1. Whether the Appellate Authority was justified in refusing to entertain the appeal on the ground of non-deposit of 10% of the disputed tax amount, when the petitioner claims to have made the deposit? (Question of law and fact, turning on Section 107 of the CGST Act, 2017). Petitioner's contentions: The petitioner argued that the mandatory 10% deposit had been made, as evidenced by a receipt for Rs. 1,24,000/-, and this fact was overlooked by the Appellate Authority, leading to an erroneous refusal to hear the appeal on merits. The petitioner relied on the annexed receipt as proof of compliance. Revenue's contentions: The respondents (UT of J&K and Ors) argued that if the petitioner had indeed deposited the required 10% of the disputed amount, then the Appellate Authority had no valid reason to refuse to entertain the appeal. They did not present any counter-argument to the petitioner's claim of deposit.