Mandatory Pre-Deposit Requirement under Section 107(6) of the Central GST Act

Mandatory Pre-Deposit Requirement under Section 107(6) of the Central GST Act

Introduction

The decision in M/s Impressive Data Services Private Limited v. Commissioner (Appeals-I), Central Tax GST, Delhi (2025 DHC 2651-DB) marks a decisive ruling on the non-waivability of the pre-deposit requirement under Section 107(6) of the Central Goods and Services Tax Act, 2017. The petitioner, a data‐services provider, challenged a Show Cause Notice alleging wrongful availment of Input Tax Credit (ITC) during 2017–20 and sought exemption from depositing 10% of the disputed tax before prosecuting its appeal. The Delhi High Court Division Bench, after hearing both sides, reaffirmed that no judicial discretion exists to waive the mandatory pre-deposit, relying on binding precedents.

Summary of the Judgment

The court considered:

  • The petitioner’s plea that clerical mistakes in transition to GST and non-availment of ITC rendered the demand incorrect;
  • The argument that withholding of substantial sums by government customers caused financial hardship;
  • The respondent’s reliance on earlier Division Bench rulings overruling lenient precedents like Shubh Impex;
  • Statutory language of Section 107(6) mandating full payment of admitted tax and 10% pre-deposit of disputed tax.

Relying on the Division Bench judgment in Diamond Entertainment Technologies (P.) Ltd. v. Commissioner of Central Goods and Tax Commissionerate, Dehradun, which in turn followed Anjani Technoplast Ltd. v. CCE (upheld by the Supreme Court), the court held:

  • Section 107(6) contains a clear, mandatory requirement to deposit the specified amounts;
  • No discretion is available to waive either the admitted portion or the 10% disputed portion;
  • The petitioner may, however, before the appellate authority, claim adjustment of amounts already lying with government entities towards the pre-deposit.

The petition was dismissed, and the petitioner relegated to deposit the statutory amount before filing its appeal.

Analysis

1. Precedents Cited

The court traversed the following key authorities:

  • Anjani Technoplast Ltd. v. CCE (2017) 348 ELT A132 (SC)
    • Held that amendments introducing mandatory pre-deposit in excise appeals under Section 35F/129E allowed no discretion to waive the requirement.
    • Upheld by the Supreme Court, thus binding under Article 141 of the Constitution.
  • Pioneer Corporation v. Union of India (2016) 340 ELT 63
    • Permitted partial pre-deposit in excise appeals based on hardship, but was overruled by subsequent binding authorities.
  • Shubh Impex v. Union of India (2018) 361 ELT 199 (Del)
    • Allowed waiver of pre-deposit in certain cases of financial hardship; superseded by Anjani Technoplast and Diamond Entertainment.
  • Manoj Kumar Jha v. DRI (2019) 365 ELT 166 (Del)
    • Followed lenient precedents; subsequently held to be contrary law and disapproved.
  • Diamond Entertainment Technologies (P.) Ltd. v. Commissioner… (W.P.(C) 10091/2019)
    • Clarified that post-amendment appeals under GST/Excise demand full compliance with mandatory pre-deposit provisions.
    • Reconciled that lenient Division Bench decisions must give way to binding precedents under Article 141.

2. Legal Reasoning

The judgment rested on two pillars:

  1. Statutory Interpretation: The language of Section 107(6)—“No appeal shall be filed… unless the appellant has paid… in full… and a sum equal to ten per cent….”—is clear and unambiguous. There is no mention of a discretionary carve-out for hardship.
  2. Doctrine of Binding Precedent: Under Article 141, decisions of a larger bench or the Supreme Court bind all subordinate courts. The Division Bench in Diamond Entertainment followed Anjani Technoplast (SC) rather than earlier lenient rulings. This Court was bound to give effect to that binding precedent.

3. Impact

This ruling has significant implications:

  • It curtails judicial discretion to grant pre-deposit waivers in GST appeals, ensuring uniformity and greater revenue security.
  • Litigants facing significant financial demands must arrange funds or negotiate adjustments with government entities prior to appeal.
  • Reinforces the binding nature of Supreme Court and coordinate bench Division Bench decisions, signaling lower courts to resist following outlier judgments.
  • May expedite revenue realization but could impose cash-flow burdens on taxpayers and service providers.

Complex Concepts Simplified

  • Pre-Deposit: A statutory requirement to deposit a portion of the tax demand (10% of disputed tax plus full admitted tax) before filing an appellate petition.
  • Input Tax Credit (ITC): The mechanism under GST by which a taxpayer may claim credit for tax paid on inputs, subject to proper documentation and compliance.
  • Show Cause Notice: A formal notice issued by tax authorities requiring a taxpayer to “show cause” why a tax demand should not be confirmed.
  • Article 141 of the Constitution: Establishes that Supreme Court judgments are binding on all courts in India; certain Division Bench decisions binding coordinate benches.

Conclusion

The Delhi High Court’s decision in M/s Impressive Data Services crystallizes the non-waivable nature of the pre-deposit requirement under Section 107(6) of the Central GST Act. By aligning with Anjani Technoplast and Diamond Entertainment, the judgment reinforces strict compliance with statutory mandates and the primacy of binding precedents. Taxpayers and practitioners must now factor in the financial outlay for pre-deposits when contemplating appellate strategies, and wherever possible negotiate credit adjustments with government clients before filing appeals. This ruling thereby advances predictability and uniformity in GST appellate jurisprudence.

Case Details

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