Voluntary Tax Deposit under Section 73(5) Must Be Treated as Pre-Deposit for Appeal under Section 107- Says Bombay High Court
The Bombay High Court clarified that amount voluntarily deposited under Section 73(5) cannot be ignored while calculating the mandatory pre-deposit for filing an appeal under Section 107.
Case Citation
M/s. Vinod Metal, a proprietorship concern of Vinodkumar Velraj Mehta, M/s. Vinod Steel, Versus The State of Maharashtra & Ors.
WRIT PETITION (L) NO. 17026 OF 2023, 17031 OF 2023, 17037 OF 2023, 17039 OF 2023, 17043 OF 2023, WRIT PETITION (L) NO. 17048 OF 2023, WRIT PETITION (L) NO. 17050 OF 2023 WRIT PETITION (L) NO. 17058 OF 2023 WRIT PETITION (L) NO. 17059 OF 2023
Dated:- July 18, 2023
Bombay High Court
1. Main Issue Involved
Whether the amount voluntarily deposited by the taxpayer under Section 73(5) of the CGST Act before issuance of show cause notice can be considered towards compliance with the mandatory pre-deposit requirement under Section 107(6) for filing an appeal.
The issue arises frequently where taxpayers have already deposited tax during investigation but are required to make further deposit for filing appeal due to technical interpretation of the portal.
2. Sections and Rules Discussed
Section 73 – Determination of tax not paid or short paid
Section 73(5) – Voluntary payment before issuance of notice
Section 73(6) – Closure of proceedings upon such payment
Section 107 – Appeals to Appellate Authority
Section 107(6) – Mandatory pre-deposit for filing appeal
The case essentially deals with the interaction between voluntary tax payment provisions and appellate pre-deposit requirements.
3. Facts of the Case
The petitioner approached the High Court under Article 226 of the Constitution raising grievance regarding the functionality of the GSTN portal.
The petitioner had made voluntary deposit of CGST under Section 73(5) during investigation. Subsequently, when the petitioner attempted to file a statutory appeal under Section 107 of the CGST Act, the GST portal did not permit filing of appeal by adjusting the amount already deposited under Section 73(5) towards the mandatory pre-deposit requirement under Section 107(6).
The petitioner contended that since the tax amount had already been deposited with the department, it should be considered as part of the pre-deposit requirement for filing appeal, instead of forcing the taxpayer to deposit additional amounts.
The GST portal however did not allow such adjustment, effectively preventing the petitioner from filing the appeal electronically.
The dispute arose primarily due to technical limitations of the GST portal rather than any express statutory prohibition.
4. Petitioner’s Submissions
The petitioner argued that:
Amount deposited under Section 73(5) should be considered for compliance with Section 107(6).
The taxpayer was not seeking refund of the deposited amount, but only adjustment towards pre-deposit.
Denial of such adjustment would make the statutory right of appeal illusory.
Procedural or technical limitations of the portal cannot defeat the statutory remedy of appeal.
The petitioner relied upon the Supreme Court decision in:
VVF (India) Ltd. v. State of Maharashtra, 2021 SCC OnLine SC 1202
where the Supreme Court held that amount deposited earlier under protest should be considered while calculating mandatory deposit for filing appeal.
The petitioner relied on constitutional principles of access to justice and effective remedy of appeal.
5. Department’s Submissions
The revenue authorities contended that:
Section 73(5) and Section 107(6) operate independently.
Voluntary deposit under Section 73(5) cannot automatically be adjusted towards appellate pre-deposit.
The GST portal operates uniformly across the country and allowing such adjustment could disturb the system framework.
The department relied on a strict procedural interpretation of the statutory provisions.
6. Analysis and Findings of the Court
The Court examined the scheme of Section 73 and Section 107 of the CGST Act.
The Court observed that right of appeal is a substantive statutory right and cannot be rendered ineffective due to procedural barriers or technical constraints of the GST portal.
The Court held that the voluntary payment under Section 73(5) is not made pursuant to any final determination of tax liability. Such deposit remains subject to the taxpayer’s rights and contentions and is ultimately adjustable against the tax liability determined in proceedings.
Therefore, when the statute requires pre-deposit under Section 107(6) for filing an appeal, the amount already deposited with the department cannot be ignored.
The Court relied upon the judgment of the Supreme Court in VVF (India) Ltd. v. State of Maharashtra, which held that amount paid under protest before assessment cannot be excluded while calculating mandatory appellate deposit unless the statute expressly provides so.
The Court applied the doctrine that procedural rules must facilitate access to justice rather than obstruct it.
7. Judgment of the Court
The High Court allowed the petitions and held that:
The petitioner was permitted to file appeal under Section 107 either electronically or manually.
The voluntary deposit made under Section 73(5) must be considered towards compliance of the pre-deposit requirement under Section 107(6).
The appellate authority was directed to register the appeal after considering such adjustment.
The appeal was directed to be heard without objection on limitation, as the petitioner had been bona fide pursuing the writ proceedings.
The Court ensured that the taxpayer’s statutory appellate remedy was preserved despite technical barriers.
8. CA BTA Insights
This judgment is important for GST appellate practice.
Key implications:
Voluntary deposit under Section 73(5) should be treated as part of pre-deposit under Section 107(6).
Taxpayers should not be forced to deposit additional amounts merely due to portal limitations.
Courts may permit manual filing of appeal where GST portal prevents compliance.
The decision strengthens the principle that procedural requirements cannot defeat substantive rights.
Practical Litigation Strategy
Taxpayers facing similar issues may:
Seek adjustment of earlier deposits towards appellate pre-deposit.
Request manual filing of appeal where portal restrictions exist.
Rely on VVF India Ltd. (SC) and this Bombay High Court judgment.
The judgment reinforces the constitutional principle that access to appellate remedies must remain real and effective under GST law.