Facts of the Case

A Show Cause Notice was issued to the petitioner, AARN Iron and Steel Private Limited, on 20.05.2024 seeking recovery of excess Input Tax Credit (ITC) for FY 2019-20 on three grounds: excess claim on account of non-reconciliation of information, ITC claimed on ineligible commodities/services, and ITC claimed from retrospectively cancelled supplying dealers. A final order dated 29.08.2024 decided in the Petitioner's favour on the reconciliation aspect but still held that excess ITC had been availed, raising a demand of Rs. 2,53,15,600 as principal and Rs. 4,89,20,836 towards penalty and interest. The Petitioner's review application against this order was rejected on 19.11.2024. Wishing to appeal both orders, the Petitioner approached the High Court under Articles 226 and 227 seeking a waiver of the mandatory 10% pre-deposit under Section 107 of the CGST Act, citing an inability to pay.

Issues Involved

  1. Whether the Appellate Authority under the CGST Act has discretion to waive or reduce the mandatory pre-deposit of 10% of the disputed tax under Section 107(6)(b) as a condition for filing an appeal.
  2. Whether a taxpayer's financial hardship entitles it to such a waiver or reduction.
  3. Whether, pending resolution of that question, the Petitioner could be granted additional time to file its appeal.

Petitioner's Arguments

  • The Petitioner lacked the financial means to deposit the substantial pre-deposit amount required under Section 107(6)(b) of the CGST Act before its appeal could be entertained.
  • It prayed that the pre-deposit condition be waived, or alternatively that the amount to be deposited be reduced.
  • In the alternative, it sought additional time to file the appeal.

Respondent's Arguments

  • Counsel for the GST Officer and for the Union of India submitted that, unlike other statutes, the CGST Act does not vest the Appellate Authority with discretion to waive the pre-deposit.
  • This absence of discretion was a deliberate legislative departure, given the significance of GST revenue collection, and the Petitioner's prayer for waiver or reduction was opposed.

Court Order / Findings

  • The Court did not examine the legislative scheme on whether any exemption, waiver or reduction of the Section 107 pre-deposit can be granted, noting that this question was yet to be adjudicated.
  • Considering the issue was still open, the Court permitted the Petitioner, "as a unique case," to file its appeal against both impugned orders within four weeks, i.e., by 20.01.2025, without deciding the waiver question itself.
  • The Court expressly clarified that the order shall not act as a precedent and that the questions of law raised in the petition are left open.
  • The petition was disposed of with this limited direction, along with all pending applications.

Important Clarification

  • Per the Department's own submission, the CGST Act does not vest the Appellate Authority with discretion to waive the mandatory 10% pre-deposit under Section 107(6)(b) — a deliberate departure from other tax statutes, given the importance of GST revenue.
  • This order does not resolve whether courts can grant exemption, waiver or reduction of the pre-deposit on hardship grounds; it merely grants a one-off extension of time to file an appeal and is expressly stated not to be a precedent for other cases.

Sections Involved

  • Section 107 of the Central Goods and Services Tax Act, 2017, particularly Section 107(6)(b) — mandates a pre-deposit of 10% of the disputed tax amount as a condition for filing an appeal before the Appellate Authority.
  • Articles 226 and 227 of the Constitution of India, 1950 — invoked for the writ remedy before the High Court.

Decision – In Favour of

Disposed of with directions and no finding on merits. The Court did not decide whether the Petitioner was entitled to a waiver or reduction of the Section 107 pre-deposit, leaving that question open; it granted a one-time, non-precedential extension of four weeks for the Petitioner to file its appeal against the ITC demand.

Related Case Laws

No directly on-point case notes on waiver of the Section 107 CGST pre-deposit are currently published on this site.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case No.: W.P.(C) 17631/2024, CM APPL. 74939/2024 & CM APPL. 74940/2024
  • CNR: DLHC010959912024
  • Coram: Justice Prathiba M. Singh and Justice Amit Sharma
  • Decision Date: 24-12-2024

Link to Download the Order

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