Facts of the Case

The petitioner, Magna Electronics India Private Limited (formerly Veoneer India Pvt. Ltd.), faced proceedings under Section 74 of the CGST Act for July 2017 to March 2020, during which it paid Rs. 1,99,10,490 under protest, exceeding 10% of the disputed demand. An Order-in-Original confirmed a total demand of Rs. 11,41,38,249. When the petitioner appealed and sought to treat the protest payment as satisfying the mandatory pre-deposit under Section 107(6), the Appellate Authority refused, compelling an additional payment of Rs. 1,14,14,339 via the Electronic Credit Ledger. Despite both payments, the Appellate Authority dismissed the appeal dated 28.02.2024 for want of the mandatory 10% pre-deposit, prompting this writ petition before the Karnataka High Court.

Issues Involved

  1. Whether an amount deposited under protest during adjudication proceedings can be treated as satisfying the mandatory 10% pre-deposit for filing a GST appeal under Section 107(6).
  2. Whether a taxpayer may discharge the pre-deposit obligation by debiting the Electronic Credit Ledger.
  3. Whether the Appellate Authority erred in dismissing the appeal despite payments exceeding the statutory 10% threshold.

Petitioner's Arguments

  • The Rs. 1,99,10,490 paid under protest during adjudication, being in excess of 10% of the disputed demand, ought to have been adjusted against the mandatory pre-deposit for the appeal.
  • Reliance was placed on the Supreme Court's ruling in VVF (India) Ltd. v. State of Maharashtra, holding that amounts deposited under protest prior to an assessment order can be adjusted against the mandatory pre-deposit under a pari materia provision.
  • The additional 10% payment of Rs. 1,14,14,339 made through the Electronic Credit Ledger was also a valid mode of pre-deposit, as held by a coordinate bench in VK Building Services Pvt. Ltd. v. Additional Commissioner of GST.
  • The impugned Order-in-Appeal ought to be set aside and the appeal restored for consideration on merits without insisting on any further pre-deposit.

Respondent's Arguments

  • The Revenue reiterated the contentions in its statement of objections, submitting that there was no merit in the petition and that it was liable to be dismissed.

Court Order / Findings

  • Following VVF (India) Ltd., the Court held that a taxing statute must be construed strictly, and nothing in Section 107(6) excludes amounts paid under protest prior to adjudication from being credited toward the mandatory pre-deposit.
  • The Appellate Authority clearly erred in holding that the protest payment could not be treated as pre-deposit, and this alone rendered the impugned order unsustainable.
  • Payment of the mandatory 10% pre-deposit through the Electronic Credit Ledger is equally permissible, as held in VK Building Services Pvt. Ltd., which traced its lineage to a Gujarat High Court ruling affirmed by the Supreme Court.
  • The impugned Order-in-Appeal was set aside and the matter remitted for reconsideration afresh on merits without insisting on any additional pre-deposit, with the appeal to be decided expeditiously after due opportunity of hearing.

Important Clarification

  • An amount paid under protest during the pendency of adjudication proceedings, if it equals or exceeds 10% of the disputed tax, satisfies the statutory pre-deposit requirement for a first appeal under Section 107(6) of the CGST Act.
  • The 10% mandatory pre-deposit may also be discharged by debiting the Electronic Credit Ledger, and Appellate Authorities cannot insist on cash payment alone.
  • Appellate Authorities must verify actual compliance with the 10% threshold across all payments made by an appellant rather than mechanically rejecting appeals on a technical reading of 'pre-deposit'.

Sections Involved

  • Section 74, CGST Act, 2017 – the provision under which the original demand was raised and adjudicated.
  • Section 107(6), CGST Act, 2017 – prescribes the mandatory 10% pre-deposit of disputed tax for filing a first appeal.
  • Electronic Credit Ledger, Section 49, CGST Act, 2017 – the ledger through which the additional pre-deposit was validly discharged.

Decision – In Favour of

The decision is in favour of the assessee. The Order-in-Appeal rejecting the appeal for want of pre-deposit was set aside and the appeal restored for hearing on merits without any further deposit condition.

Case Details

High Court of Karnataka at Bengaluru; Writ Petition No. 2444 of 2024 (T-RES); Magna Electronics India Private Limited vs Joint Commissioner of Central Tax (Appeals-II) and Another; Coram: Justice S.R. Krishna Kumar; Decided on 16.12.2025.

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