Karnataka HC: Appellants Need Not Deposit 10% of Entire Disputed Amount, Including Penalties and Fines

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Published on: December 30, 2023 at 13:00 IST

The Karnataka High Court has ruled that appellants are not obligated to deposit 10% of the entire disputed amount, which includes tax, interest, fines, fees, and penalties, as ordered by the Appellate Authority.

According to Justice Sachin Shankar Magadum’s bench, the appeal under Section 107(6) of the GST Act requires the appellant to deposit only 10% of the contested tax amount and not the broader disputed sum encompassing penalties, fines, and interest.

The appellate authority had declined to admit the appeal under Section 107(6) of the CGST Act due to the petitioner’s non-compliance with the pre-deposit requirement, prompting the petitioner/assessee to contest this order.

The petitioner argued that the directive for a 10% deposit of Rs. 1,41,11,633 was beyond the jurisdiction of the appellate authority and was inconsistent with Section 107(6) of the CGST Act.

Stressing on the term “tax in dispute” outlined in Section 107(6) of the CGST Act, the petitioner clarified that it refers solely to the disputed tax amount and not the entirety of charges like fines, penalties, fees, or interest.

Contrarily, the department asserted that by challenging the pre-deposit amount, the petitioner aimed to circumvent the appeal’s provisions. It contended that as the petitioner contested the enforcement officer’s claim entirely, 10% of the total sum assessed by the officer was mandatory.

The court’s interpretation centered on the legislative intent behind Section 107(6)(b) of the CGST Act, concluding that the appellant must pre-deposit 10% of the tax liability alone, excluding penalties, fees, or interest when contesting the entire tax liability.

Consequently, the Court set aside the appellate authority’s directive to pre-deposit 10% of Rs. 1,41,11,633. Since the petitioner had already deposited 10% of the tax liability, amounting to Rs. 67,200, the appellate authority was instructed to accept the appeal and proceed in accordance with the law.

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