Whether interest and penalty need to be included in the pre-deposit amount for filing an appeal?

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Whether interest and penalty need to be included in the pre-deposit amount for filing an appeal?

 

Section 107(6)(b) of the CGST Act, 2017 mandates an appellant to pay a sum equal to 10% of the tax in dispute mentioned in the order against which the appeal is being filed.

In a recent case in S Tejas Arecanut Traders vs. Joint Commissioner of Commercial Taxes [TS-686-HC(KAR)-2023-GST], the appellant, during the appeal filing, deposited 10% of the tax in dispute, excluding the interest and penalty stated in the order.

The Karnataka High Court scrutinized this and concluded that the Appellate Authority’s refusal to admit the appeal due to a purported failure in meeting the pre-deposit mandate was incorrect.

The Court observed that the law explicitly outlines a focused pre-deposit requirement, specifically related to the disputed tax amount which indicates the legislative intent to prioritize the financial commitment directly associated with the primary tax liability in question.

Consequently, it was held that interest and penalty, being consequential in nature, are inherently linked to the imposition of tax and, therefore, do not warrant a separate pre-deposit under the aforementioned sub-section.

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