Navnit Motors Pvt. Ltd. v. Commissioner of CGST & Central Excise, (Appeals-III), Mumbai & Anr.

1. Heard learned counsel for the parties. Heard learned counsel for the parties.

2. Rule. The Rule is made returnable immediately at the request Rule. The Rule is made returnable immediately at the request of and with the consent of the learned counsel for the parties. of and with the consent of the learned counsel for the parties.

3. The Petitioner disputes the order dated 18 March 2025, The Petitioner disputes the order dated 18 March 2025, whereby the Appellate Authority dismissed the Petitioner’s appeal on whereby the Appellate Authority dismissed the Petitioner’s appeal on the basis that using Input Tax Credit (ITC) to pay the 10% pre-deposit the basis that using Input Tax Credit (ITC) to pay the 10% pre-deposit was not permitted and does not satisfy the requirements of Section was not permitted and does not satisfy the requirements of Section 107(6) of the Central Goods and Services Tax Act, 2017 (CGST Act). 107(6) of the Central Goods and Services Tax Act, 2017 (CGST Act).

4. The impugned order could have been appealed to the GST The impugned order could have been appealed to the GST Tribunal. However, admittedly, the GST Tribunal is not functioning and, Tribunal. However, admittedly, the GST Tribunal is not functioning and, therefore, we are required to entertain this petition. Besides, before the therefore, we are required to entertain this petition. Besides, before the impugned order was made, neither was any notice given nor was the impugned order was made, neither was any notice given nor was the Petitioner heard on the issue of alleged non-compliance with the Petitioner heard on the issue of alleged non-compliance with the requirement of pre-deposit, breaching the principle of natural justice. requirement of pre-deposit, breaching the principle of natural justice. 2025:BHC-OS:10879-DB In case of such a breach, the practice of exhaustion of alternate In case of such a breach, the practice of exhaustion of alternate remedies is ordinarily not insisted upon. remedies is ordinarily not insisted upon.

5. Mr. Mr. Patkar submitted that the impugned order violates natural Patkar submitted that the impugned order violates natural justice and, in any event, the view taken by the Appellate Authority justice and, in any event, the view taken by the Appellate Authority directly conflicts with the decision of the Division Bench of this Court in directly conflicts with the decision of the Division Bench of this Court in Oasis Realty vs. Union of India & Ors. Oasis Realty vs. Union of India & Ors.1. He pointed out that the. He pointed out that the Appellate Authority by ignoring the decision of the jurisdictional High Appellate Authority by ignoring the decision of the jurisdictional High Court, chose to rely on the decision of the Patna High Court in the case Court, chose to rely on the decision of the Patna High Court in the case of of Flipkart Internet Pvt. Ltd. vs. State of Bihar & Ors. Flipkart Internet Pvt. Ltd. vs. State of Bihar & Ors.2. Here again,. Here again, Mr. Patkar pointed out that the Appellate Authority did not take Mr. Patkar pointed out that the Appellate Authority did not take cognisance of the Hon’ble Supreme Court’s order dated 4 December cognisance of the Hon’ble Supreme Court’s order dated 4 December 2023, staying paragraphs 77 and 78 of the Hon’ble Patna High Court’s 2023, staying paragraphs 77 and 78 of the Hon’ble Patna High Court’s decision. In decision. In effect, therefore, the Appellate Authority has chosen to effect, therefore, the Appellate Authority has chosen to follow the decision of the Hon’ble Patna High Court, which the Hon’ble follow the decision of the Hon’ble Patna High Court, which the Hon’ble Supreme Court has already Supreme Court has already stayed. For these reasons, Mr. Patkar stayed. For these reasons, Mr. Patkar submitted that the impugned order be set aside, and the Petitioner’s submitted that the impugned order be set aside, and the Petitioner’s appeal be declared to be validly instituted. appeal be declared to be validly instituted.

6. Mr. Sharma learned counsel for the Respondents submits that Mr. Sharma learned counsel for the Respondents submits that the view taken by this Court in Oasis Realty (supra) is required to be reconsidered because it does not take cognisance or in any event, reconsidered because it does not take cognisance or in any event, sufficient cognizance of the provisions of Section 49(4) of the CGST Act sufficient cognizance of the provisions of Section 49(4) of the CGST Act and Rule 86(2) of the CGST Rules. He submitted that in terms of and Rule 86(2) of the CGST Rules. He submitted that in terms of Section 49(4), the amount available in the electronic credit ledger can Section 49(4), the amount available in the electronic credit ledger can only be used for making payment towards output tax, and that too, only be used for making payment towards output tax, and that too, subject to such conditions and restrictions as may be prescribed. He subject to such conditions and restrictions as may be prescribed. He then referred to Rule 86(2) to submit that the electronic credit ledger then referred to Rule 86(2) to submit that the electronic credit ledger can be debited to the extent of discharge of any liability in accordance can be debited to the extent of discharge of any liability in accordance with the provisions of Section 49 of the CGST Act. He submitted that a with the provisions of Section 49 of the CGST Act. He submitted that a 1 2023 120 GSTR 755 (Bom) 2 2024 132 GSTR 369 (Patna) pre-deposit for maintainability of an appeal can hardly be styled as any pre-deposit for maintainability of an appeal can hardly be styled as any liability of tax, and utilising the ITC from out of such electronic credit liability of tax, and utilising the ITC from out of such electronic credit ledger cannot be regarded as discharging any liability in accordance ledger cannot be regarded as discharging any liability in accordance with the provisions of Section 49(2) of the CGST Act. with the provisions of Section 49(2) of the CGST Act.

7. Mr. Sharma further pointed out that the stay order issued by Mr. Sharma further pointed out that the stay order issued by the Hon’ble Supreme Court was ex parte, and the matter is still pending. He, therefore, submitted that there was nothing wrong in the pending. He, therefore, submitted that there was nothing wrong in the view taken by the Appellate Authority and in any event, this Court must view taken by the Appellate Authority and in any event, this Court must await the disposal of the proceedings before the Hon’ble Supreme await the disposal of the proceedings before the Hon’ble Supreme Court. Court.

8. The rival contentions now fall for our determination. The rival contentions now fall for our determination.

9. The Appellate Authority made the impugned order without The Appellate Authority made the impugned order without giving any notice to the Petitioner about the proposal to non-suit the giving any notice to the Petitioner about the proposal to non-suit the Petitioner on the ground of alleged non-compliance with the provisions Petitioner on the ground of alleged non-compliance with the provisions of Section 107(6) of the CGST Act concerning pre-deposit. Since the of Section 107(6) of the CGST Act concerning pre-deposit. Since the jurisdictional High Court in Oasis Realty (supra) had already taken the view that ITC can be utilised for making such a pre-deposit, the least view that ITC can be utilised for making such a pre-deposit, the least that was expected of the Appellate Authority was to put the Petitioner that was expected of the Appellate Authority was to put the Petitioner on notice. Since this was not done, we are satisfied that there was a on notice. Since this was not done, we are satisfied that there was a breach of principles of natural justice, and on this ground, the breach of principles of natural justice, and on this ground, the impugned order deserves to be set aside. impugned order deserves to be set aside.

10. However, even if we were to exclude the ground of natural However, even if we were to exclude the ground of natural justice, the impugned order warrants interference because the view justice, the impugned order warrants interference because the view taken therein is directly opposed to the view taken by this Court in the taken therein is directly opposed to the view taken by this Court in the case of case of Oasis Realty (supra), which is, insofar as the Appellate Authority which is, insofar as the Appellate Authority is concerned, the jurisdictional High Court. is concerned, the jurisdictional High Court.

11. In Oasis Realty (supra) the Co-ordinate Bench of this Court comprising K. R. Shriram, J. (as his Lordship then was) and A. S. comprising K. R. Shriram, J. (as his Lordship then was) and A. S. Doctor, J. has held that the requirement of pre-deposit of 10% of the Doctor, J. has held that the requirement of pre-deposit of 10% of the disputed tax for an appeal can be complied with by utilising the amount disputed tax for an appeal can be complied with by utilising the amount available in the electronic credit ledger i.e. through ITC. Whatever may available in the electronic credit ledger i.e. through ITC. Whatever may be the submissions of Mr. Sharma before this Court regarding this be the submissions of Mr. Sharma before this Court regarding this Court’s view in Oasis Realty (supra) warranting reconsideration, there can be no doubt that this Court’s decision in Oasis Realty (supra) was binding upon the Appellate Authority and the Appellate Authority was binding upon the Appellate Authority and the Appellate Authority was not justified ignoring this decision of the jurisdictional High Court. Such not justified ignoring this decision of the jurisdictional High Court. Such an approach, if countenanced, would be contrary to the judicial or an approach, if countenanced, would be contrary to the judicial or quasi-judicial discipline. quasi-judicial discipline.

12. Instead, the Appellate Authority chose to rely on the decision Instead, the Appellate Authority chose to rely on the decision of the Patna High Court in the case of of the Patna High Court in the case of Flipkart Internet Pvt. Ltd. (supra) Flipkart Internet Pvt. Ltd. (supra).. The decision of the Patna High Court, at the highest, could have held The decision of the Patna High Court, at the highest, could have held that some persuasive value, in the absence of any decision of the that some persuasive value, in the absence of any decision of the Hon’ble Supreme Court or the jurisdictional High Court. The Patna High Hon’ble Supreme Court or the jurisdictional High Court. The Patna High Court in paragraph 58 of its judgment has referred to this Court’s Court in paragraph 58 of its judgment has referred to this Court’s decision in decision in Oasis Realty (supra) Oasis Realty (supra). However, the Patna High Court, after. However, the Patna High Court, after considering the same, has held that it was unable to agree with the view considering the same, has held that it was unable to agree with the view taken by the Bombay High Court. taken by the Bombay High Court.

13. If the Appellate Authority had read the decision of the Patna If the Appellate Authority had read the decision of the Patna High Court in its entirety, surely, the Appellate Authority would have High Court in its entirety, surely, the Appellate Authority would have realised that its jurisdictional High Court had taken a view contrary to realised that its jurisdictional High Court had taken a view contrary to that of the Patna High Court. The Appellate Authority was not at all that of the Patna High Court. The Appellate Authority was not at all justified in ignoring the decision of its jurisdictional High Court and justified in ignoring the decision of its jurisdictional High Court and following the decision of the Patna High Court in following the decision of the Patna High Court in Flipkart Internet Pvt. Flipkart Internet Pvt. Ltd. (supra) Ltd. (supra)..

14. Furthermore, if the Appellate Authority were to have bothered Furthermore, if the Appellate Authority were to have bothered to issue a notice to the Petitioner, then the Petitioner, in all probabilities, to issue a notice to the Petitioner, then the Petitioner, in all probabilities, would not only have relied upon this Court’s decision in would not only have relied upon this Court’s decision in Oasis Realty Oasis Realty (supra) (supra) but also pointed out that the Hon’ble Supreme Court’s order but also pointed out that the Hon’ble Supreme Court’s order dated 4 December 2023 in the appeal instituted by M/s. Flipkart dated 4 December 2023 in the appeal instituted by M/s. Flipkart Internet Pvt. Ltd. challenging the Patna High Court’s order. The Hon’ble Internet Pvt. Ltd. challenging the Patna High Court’s order. The Hon’ble Supreme Court, by its interim order dated 4 December 2023, not only Supreme Court, by its interim order dated 4 December 2023, not only issued notice to the Respondents, but directed that pending the disposal issued notice to the Respondents, but directed that pending the disposal of the matter, “ of the matter, “the observations in paragraphs 77 and 78 of the the observations in paragraphs 77 and 78 of the impugned order shall remain stayed impugned order shall remain stayed”. ”.

15. The observations in paragraphs 77 and 78 of the Patna High The observations in paragraphs 77 and 78 of the Patna High Court’s order, which the Hon’ble Supreme Court has now stayed, read Court’s order, which the Hon’ble Supreme Court has now stayed, read as follows:as follows:-