NEW DELHI Central Board of Indirect Taxes & Customs (CBIC) has said that pre-deposits for appeals in cases related to erstwhile Central Excise Duty and Service Tax can be made only in cash and not through Electronic Cash Ledger. Experts feel such a move aims to nullify rulings by various High Courts in favour of taxpayers. 

“Payments through DRC-03 under CGST regime is not a valid mode of payment for making pre-deposits under section 35F of the Central Excise Act, 1944 and Section 83 of Finance Act, 1994 read with section 35F of the CEA,” CBIC said in an instruction. Further, it said, a dedicated CBIC-GST portal exists for effecting the pre-deposit.  

Commenting on the instruction, Parag Mehta, Partner, N.A. Shah Associates said, it has been issued after over five years since the introduction of GST, wherein umpteen appeals have been filed utilising the balance in ECL and filing DRC – 03. So, the big question is what will be the state of those appeals. “The instruction appears to be issued contrary to the legal position and to nullify the effects of various Courts on the said matter,” he said. 

This instruction was issued after the Bombay High Court, in the matter of Sodexo India Services vs Union of India, directed CBIC on October 3 to decide and come out with instructions. In its petition, the company said that it made a pre-deposit in cash through Form GST DRC-03. The appeals were accepted and registered, and appeal numbers were allotted. However, later it found that all the appeals came to be dismissed, stating that the pre-deposit was improper.  

The company also said that in the order and during the personal hearing, the tax department does not state how the deposit should have been made. At the same time, the tax officer, who issued an order, said in an affidavit that the law and the circulars issued, do not permit pre-deposit in the manner made by the petitioner, and earlier payment was accepted due to oversight.  

“The proceedings under Central Excise Act, 1944 or Finance Act, 1994 and CGST are separate proceedings and, therefore, payment method used under the old laws, i.e., Central Excise Act, 1944 and Finance Act, 1994 cannot be used for payment under CGST Act,” the officer said. It was also mentioned that the tools available under the CGST laws may be utilised for making payments under the CGST laws. 

After going through all the arguments and facts placed on the record, the Court felt it does appear that the confusion seems to be due to no proper legal provision to accept payment of pre-deposit. Accordingly, it asked CBIC to clear the air immediately. 

In the instruction, CBIC said that any credit, tax, interest, fine or penalty recoverable from the person before, on, or after July 1, 2017, under the existing law (Central Excise Act and Chapter-V of Finance Act. 1994) should be recovered as an arrear of tax under CGST Act. “It is, however, settled that pre-deposit as a requirement for exercising the right to appeal neither is in the nature of duty nor can be treated as arrears under the existing law and hence cannot be said to be covered under transitional provisions of CGST Act,” the board said. 

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