Facts of the Case

The petitioner, M/s R M Dairy Products LLP, a manufacturer and trader of dairy products (GSTIN 09115FR3755M1ZA), had its premises surveyed by DGGSTI officers on 17.02.2021, during which it deposited Rs. 1.40 crores under protest without any adjudicated tax liability. Proceedings under Section 74 of the GST Act followed, resulting in an order dated 03.12.2022 creating liability of Rs. 7,06,66,700/- for the period February 2020 to November 2020 across five connected writ petitions. The petitioner's appeal against this order was dismissed as not maintainable for failure to deposit the mandatory 10% pre-deposit under Section 107(6)(ii), even though the Rs. 1.40 crore deposited under protest had never been adjusted against this or any other demand.

Issues Involved

  1. Whether an amount deposited under protest prior to adjudication can be treated as satisfying the mandatory pre-deposit of 10% of the disputed tax required under Section 107(6)(ii) for filing a first appeal.
  2. Whether the appellate authority was justified in rejecting the appeal as not maintainable without accounting for the un-adjusted protest deposit.

Petitioner's Arguments

  • The Rs. 1.40 crore deposited under protest during the DGGSTI search remained un-adjusted against any demand and could be treated as pre-deposit for the appeal.
  • Clause 6 of CBIC Circular No. 172/04/2022-GST dated 06.07.2022 permits payment of output tax, including amounts payable under GST proceedings, from the Electronic Credit Ledger.
  • Reliance was placed on VVF (India) Ltd. vs. State of Maharashtra and the Gujarat High Court ruling in Yasho Industries Ltd. vs. Union of India, since affirmed by the Supreme Court.

Respondent's Arguments

  • The petitioner was duty-bound to deposit 10% of the disputed tax under Section 107(6)(ii) and failed to produce documentary evidence of such deposit.
  • Mere deposit under protest, without formal adjustment against the pre-deposit requirement, could not entitle the petitioner to bypass the statutory condition for maintainability of the appeal.

Court Order / Findings

  • Relying on the Supreme Court's ruling in VVF (India) Ltd., interpreting the analogous provision under the Maharashtra VAT Act, the Court held that an amount deposited under protest prior to assessment can be adjusted against the mandatory pre-deposit, since the statute nowhere excludes protest payments from being so treated.
  • The Court also relied on Yasho Industries Ltd., as affirmed by the Supreme Court, and the Lucknow Bench ruling in M/s O.C. Infraventures and Construction Pvt. Ltd., permitting payment of pre-deposit through the Electronic Credit Ledger under CBIC Circular No. 172/04/2022-GST.
  • Since the Rs. 1.40 crore deposited under protest had not been adjusted against any other demand, the Court held the petitioner was entitled to use it towards the 10% pre-deposit for all five connected appeals.
  • The impugned appellate orders in all five writ petitions were quashed, and the matter remanded to the first appellate authority to accept the protest deposit as pre-deposit and decide the appeals on merits by a reasoned order, with any shortfall to be intimated and deposited within 15 days.

Important Clarification

  • An amount paid under protest during search or investigation, prior to any adjudicated liability, is not disqualified from being counted towards the mandatory 10% pre-deposit under Section 107(6) merely because it was not formally labelled as 'pre-deposit' at the time of payment.
  • The appellate authority must verify whether such a protest deposit remains un-adjusted against any other demand before rejecting an appeal for want of pre-deposit; a mechanical rejection ignoring this adjustment is unsustainable.

Sections Involved

  • Section 74, CGST Act, 2017 – determination of tax not paid by reason of fraud, wilful misstatement, or suppression of facts.
  • Section 107(6), CGST Act, 2017 – mandatory pre-deposit of 10% of disputed tax as a precondition for filing a first appeal.
  • CBIC Circular No. 172/04/2022-GST dated 06.07.2022 – permits payment of tax dues, including under GST proceedings, from the Electronic Credit Ledger.

Decision – In Favour of

Allowed in favour of the Assessee — the appellate rejection for want of pre-deposit was quashed, with the protest deposit to be treated as satisfying Section 107(6), and the appeals remanded for decision on merits.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No. 987 of 2023 (with connected Writ Tax Nos. 988, 990, 991 and 992 of 2023)
  • Coram: Hon'ble Piyush Agrawal, J.
  • Date of Order: 25 September 2025

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