Facts of the Case

M/s VK Building Services Private Limited's appeal against an order confirming a GST demand was rejected by the appellate authority on 11.12.2023, on the ground that the mandatory pre-deposit necessary under Section 107(6)(b) of the CGST Act, 2017 had been paid through the electronic credit ledger by electronic mode rather than in cash. The petitioner challenged this rejection, relying on the Gujarat High Court's decision in Yasho Industries Ltd. vs. Union of India, which had held pre-deposit paid from the electronic credit ledger to be valid compliance with Section 107(6)(b), and noted that the Union of India's challenge to that ruling before the Supreme Court had been dismissed.

Issues Involved

  1. Whether the 10% mandatory pre-deposit required under Section 107(6)(b) of the CGST Act for filing a first appeal can be paid by debiting the electronic credit ledger, or whether it must necessarily be paid from the electronic cash ledger.

Petitioner's Arguments

  • The issue was squarely covered by the Gujarat High Court's decision in Yasho Industries Ltd. (following Shiv Crackers), which held that pre-deposit under Section 107(6)(b) can be paid using the electronic credit ledger, and that the Special Leave Petition against this view was dismissed by the Supreme Court.

Respondent's Arguments

  • The appellate authority had rejected the appeal solely on the footing that pre-deposit through the electronic credit ledger was not valid compliance, requiring payment through the electronic cash ledger instead.

Court Order / Findings

  • The Court extensively relied on the Gujarat High Court's reasoning in Yasho Industries (following Shiv Crackers and Oasis Realty), which held that Section 107(6)(b) requires the appellant to 'pay' — not 'deposit in cash' — 10% of the disputed tax, and that Section 49(4) of the CGST Act permits the electronic credit ledger to be used for payment of output tax, including amounts payable pursuant to any proceeding.
  • The CBIC Circular dated 06.07.2022 was noted as clarifying that any payment towards output tax, whether self-assessed or arising from proceedings, can be made through the electronic credit ledger.
  • Since the Supreme Court had dismissed the Special Leave Petition against the Gujarat High Court's ruling, the Court held the issue was no longer res integra and required no further deliberation.
  • The impugned order dated 11.12.2023 rejecting the appeal was quashed, the appeal in Form GST APL-01 was restored, and the appellate authority was directed to decide it on merits.

Important Clarification

  • The 10% pre-deposit mandated under Section 107(6)(b) of the CGST Act to maintain a first appeal can validly be paid by debiting the electronic credit ledger; it need not be paid exclusively from the electronic cash ledger.
  • The electronic credit ledger cannot be used for interest, penalty, fees, or other non-tax liabilities, but pre-deposit of the disputed tax amount for an appeal is treated as payment of output tax and is permissible from the credit ledger.

Sections Involved

  • Section 107(6)(b), CGST Act, 2017 — mandatory pre-deposit of 10% of disputed tax for filing a first appeal.
  • Section 49(3)/(4), CGST Act, 2017 — utilisation of the electronic cash and credit ledgers.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, with the rejection order quashed and the appeal restored for hearing on merits.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 21409 of 2025 (T-RES)
Coram: Hon'ble Mr. Justice M. Nagaprasanna
Date of Order: 14.08.2025

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.