Facts of the Case

The petitioner, a registered dealer under the CGST and SGST Acts, 2017, engaged in the purchase and sale of iron scrap, was subjected to an inspection on 21.01.2023 by the Assistant Commissioner (ST), Regional GST Audit and Enforcement Wing, resulting in a demand of tax, penalty and interest of over Rs.5.48 crore vide orders under Form GST DRC-07. The petitioner filed an appeal under Section 107 of the CGST/APGST Act, 2017 before the second respondent, Additional Commissioner (ST) and Appellate Authority, Tirupati, along with a request to condone a delay of 25 days beyond the statutory limitation period, since the petitioner's bank accounts had been frozen by the Department, preventing timely mobilisation of funds for the mandatory 10% pre-deposit. The Appellate Authority rejected both the delay-condonation request and the appeal by order dated 03.06.2023.

Issues Involved

  1. Whether the petitioner was prevented by sufficient cause from presenting the appeal within the statutory period of limitation under Section 107(4) of the CGST Act.

Petitioner's Arguments

  • The delay was caused by an unforeseen financial crisis, compounded by the freezing of the petitioner's bank accounts and blocking of input tax credit by the Department, which left him unable to pay the mandatory 10% pre-deposit under Section 107(6) in time.
  • The petitioner eventually secured a loan from a business associate to pay the pre-deposit, and the Appellate Authority failed to exercise its discretion judiciously by disregarding this genuine cause for delay.

Respondent's Arguments

  • The impugned order was a reasoned order; the reasons for delay were unconvincing, the petitioner had not furnished details of the alleged financial crisis, and the claim of difficulty in securing a loan was far from the truth, justifying rejection of the appeal.

Court Order / Findings

  • Referring to Collector, Land Acquisition v. Mst. Katiji and the settled position that "sufficient cause" under Section 107(4) must be construed with a justice-oriented approach, the Court held that the Commissioner (Appeals) never disputed the fact that the petitioner's bank accounts had been frozen and notices issued to his customers.
  • The Court held that when a pre-deposit under Section 107(6) is mandatory for filing an appeal and the appellant's bank accounts stand frozen by the very authorities concerned, that is a relevant fact going to sufficient cause for delay, and rejecting the appeal on this basis amounted to "forcing the horse to run after tying the legs."
  • The Writ Petition was allowed, the impugned order dated 03.06.2023 was set aside, and the second respondent was directed to restore the appeal and dispose of it on merits in accordance with law.

Important Clarification

Where an assessee's bank accounts are frozen by the GST Department itself, thereby delaying the mandatory pre-deposit required to file a first appeal under Section 107(6), that circumstance constitutes sufficient cause for condoning delay within the further one-month condonable period under Section 107(4); the right of appeal is a substantive statutory right that cannot be defeated by a pedantic view of the cause shown.

Sections Involved

  • Section 107(4), CGST Act, 2017 — permits condonation of delay up to a further one month upon sufficient cause being shown.
  • Section 107(6), CGST Act, 2017 — mandates pre-deposit of 10% of disputed tax as a precondition for filing an appeal.

Decision – In Favour of

In favour of the Assessee — the rejection of the appeal was set aside and the appeal restored for disposal on merits.

Case Details

  • Court: High Court of Andhra Pradesh at Amaravati
  • Case Number: WP.No.15490 of 2023
  • CNR / Citation: W.P.No.15490 OF 2023
  • Coram: Hon'ble Sri Justice U. Durga Prasad Rao & Hon'ble Smt. Justice Venkata Jyothirmai Pratapa
  • Date of Order: 19 July 2023

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