Pre-deposit provisions in GST - A re-look warranted
MARCH 25, 2025
By TIOL Edit Team
PRE-DEPOSIT provisions in CEA, 1944 versus CGST Act, 2017 is tabulated below -
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Central Excise Act, 1944
35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal
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CGST Act, 2017
107. Appeals to Appellate Authority.
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CGST Act, 2017 Z
112. Appeals to Appellate Tribunal
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35F. The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal -
(i) under sub-section (1) of section 35 [Appeals to Commissioner(A)], unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute-in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Principal Commissioner of Central Excise or Commissioner of Central Excise;
(ii) against the decision or order referred to in clause (a) of sub-section (1) of section 35B [a decision or order passed by the Principal Commissioner of Central Excise or Commissioner of Central Excise as an adjudicating authority], unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;
(iii) against the decision or order referred to in clause (b) of sub-section (1) of section 35B [an order passed by the Commissioner (Appeals) under section 35A], unless the appellant has deposited ten per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against:
Provided that the amount required to be deposited under this section shall not exceed rupees ten crores :
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107. (1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
(6) No appeal shall be filed under sub-section (1), unless the appellant has paid -
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him ; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.
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112. (1) Any person aggrieved by an order passed against him under section 107 or section 108 of this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act may appeal to the Appellate Tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal ; or the date, as may be notified by the Government, on the recommendations of the Council, for filing appeal before the Appellate Tribunal under this Act, whichever is later.
(8) No appeal shall be filed under sub-section (1), unless the appellant has paid --
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.
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As per Section 35F of the CEA, 1944 [as substituted by the Finance (No.2) Act, 2014, enacted on 06 August 2014], the amount of pre-deposit payable for appeals in Customs, Central Excise and Service Tax matters is:
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1
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Appeal to Commissioner (Appeals) against an order passed by an officer of Central Excise lower in rank than the Principal Commissioner of Central Excise or Commissioner of Central Excise
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7.5% of the duty.
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2
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Appeal to CESTAT against an order of the Principal Commissioner of Central Excise or Commissioner of Central Excise as an adjudicating authority
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7.5% of the duty
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3
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Appeal to the CESTAT against an order passed by Commissioner (Appeals)
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10% of the duty
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Consider the following example. The adjudicating authority confirmed a demand of Central excise duty and also imposes penalty. While appealing to the Commissioner (Appeals), an amount of 7.5 percent of the duty is required to be deposited. Presuming that the assessee is also aggrieved by the Order passed by Commissioner(A), he needs to file an appeal to the CESTAT and for which he is required to pre-deposit an amount of 10 percent of the duty demand confirmed/upheld by the Commissioner(A).
The question was whether this 10% pre-deposit is to be deposited afresh or can the earlier paid 7.5% pre-deposit [made for filing appeal before Commissioner(A)] be adjusted towards the 10% pre-deposit quantum.
The D.O. letter F. No. 334/15/2014-TRU dated 10th July 2014 issued along with the Finance Bill, 2014 had given a lead in the matter.
It mentioned the following -
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Annex IV
LEGISLATIVE CHANGES
Amendments in the Customs Act, 1962
14) Section 129E is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and another 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs. 10 crore.
Amendments in the Central Excise Act, 1944
13) Section 35F is being substituted with a new section to prescribe a mandatory fixed pre-deposit of 7.5% of the duty demanded or penalty imposed or both for filing appeal with the Commissioner (Appeals) or the Tribunal at the first stage and another 10% of the duty demanded or penalty imposed or both for filing second stage appeal before the Tribunal. The amount of pre-deposit payable would be subject to a ceiling of Rs.10 crore.
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The words "and another" employed by the TRU did not put matters to rest. In fact, it created a confusion!
Thankfully, this task was taken up by the CESTAT.
In the case of M/s HINDALCO INDUSTRIES LTD & Ors. 2016-TIOL-3050-CESTAT-KOL, the CESTAT held that the Appellants were required to pay additional 10% deposit, under Section 35F(iii) of the Central Excise Act, 1944 or Section 129E(iii) of the Customs Act, 1962, in addition to 7.5% deposit made before the first appellate authority.
Perhaps, these words "in addition to" caught the fancy of the law-makers while drafting the GST law [clause (b) to Section 112(8)] as is evident from the Tabulation.
So, an assessee who wishes to file an appeal before the GST Appellate Tribunal [which unfortunately, till date, has not yet seen the light of the day!] has to follow the procedure envisaged in Circular 224/18/2024-GST; Dated: July 11, 2024.
Paragraph 4 is extracted below -
"4. In order to facilitate the taxpayers to make the payment of the amount of pre-deposit as per sub-section (8) of section 112 of CGST Act, and to avail the benefit of stay from recovery of the remaining amount of confirmed demand as per sub-section (9) of section 112 of CGST Act, it is hereby clarified that in cases where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make the payment of the amount of pre-deposit as per sub-section (8) of section 112 of CGST Act, he can make the payment of an amount equal to the amount of pre-deposit…The said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required to be deposited at the time of filing appeal before the Appellate Tribunal."
Suffice to say that the assessee who wishes to appeal to the GSTAT is required to pay in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order [Order passed by the Appellate authority], as is admitted by him, and a sum equal to ten per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order subject to a maximum of twenty crore rupees.
Let us take a hypothetical example wherein only tax is confirmed and no interest, fine, fee or penalty is imposed.
A tax amount of Rs.100/- is confirmed by the adjudicating authority.
For filing an appeal before the Appellate authority, the assessee has to pay, as per s.107(6) -
(a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed.
Assuming for the purpose of this discussion, the assessee "admits" the Tax of Rs.50/-. This satisfies clause (a) above.
Insofar as clause (b) is concerned, the assessee has to invariably pay a sum equal to ten per cent of the remaining amount of ONLY "tax" [and not interest, fine, fee and penalty]. So, he is required to pay 10% of the remaining amount of tax, and which is 10% of Rs.50/- [since tax of Rs.50/- is already admitted] = Rs.5/-.
In totality, the assessee would be paying Rs.50/- + Rs.5/- = Rs.55/- as pre-deposit for the purpose of filing appeal before the Appellate authority.
Pertinent to note that since the assessee has admitted the tax amount of Rs.50/-, his appeal would be in respect of the balance tax of Rs.50/- only.
Assuming that the appeal is rejected by the appellate authority, the aggrieved assessee is required to file appeal before the Appellate Tribunal.
And since the Tribunal is not yet functional, in terms of the Circular 224 (supra) he has to make the payment of an amount equal to the amount of pre-deposit.
And he goes about it thus [s.112(8)] -
Clause (a) - No admission of any tax.
Clause (b) - Ten percent of the remaining amount of tax (viz. Rs.50/-) in dispute arising from the order of the appellate authority viz. 10% of Rs.50/- = Rs.5/-.
In totality, the assessee who admits tax of Rs.50/- [against confirmed tax demand of Rs.100/-] would have paid the pre-deposit amounts of Rs.55/- [first appeal] and Rs.5/- [Tribunal] respectively, a total of Rs.60/-.
Alternatively, had the assessee not "admitted" any amount of tax in the aforesaid example, his outgoing towards pre-deposit would have been -
+ Before Appellate authority - 10% of Rs.100/- = Rs.10/- [clause (a) to s.107(6)]
+ Before Appellate Tribunal - 10% of Rs.100/- = Rs.10/- [clause (a) to s.112(8)]
A total of Rs.20/- would be the amount an assessee would be making as pre-deposit if he does not admit any tax and which guarantees him stay from recovery of the balance amount of the confirmed demand amount.
Notwithstanding that the interest liability may be on the higher side when the appeal is decided against, Isn't "not admitting" any tax a prudent option?
By the way, why is it that the admission of amounts mentioned in clause (a) of s.107(6) as well as clause (a) of s.112(8) is qua tax, interest, fine, fee and penalty whereas clause (b) in both sub-sections only refers to "tax".
The Council should, therefore, take a re-look at clauses (a) and (b) of s.107(6)/s.112(8) and ensure fairness in the appeal provisions.
