Pre-deposit to appeal under old excise, service tax laws to be only in cash: CBIC

The Central Board of Indirect Taxes and Customs (CBIC) has said that pre-deposits for appeals in cases related to the erstwhile Central Excise Duty and Service Tax can be made only in cash and not through Electronic Cash Ledger (ECL). Experts feel such a move is 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 the Finance Act, 1994 read with Section 35F of the CEA,” the CBIC said in an instruction. It said a dedicated CBIC-GST portal exists for affecting the pre-deposit. Commenting on the instruction, Parag Mehta, Partner, N.A. Shah Associates, said that 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 Sodexo India Services vs. Union of India, directed the CBIC on October 3 to decide and come out with instructions. In its petition, the company said that it had made a pre-deposit via ECL through Form GST DRC-03. The appeals were accepted and registered and appeal numbers were allotted. However, later it found that all the appeals had been dismissed, on the ground that the pre-deposit was improper. The company also said that in the order and during the personal hearing, the Tax Department did 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 that the ECL , payment was accepted by oversight. “The proceedings under the Central Excise Act, 1944 or the Finance Act, 1994 and CGST are separate proceedings and, therefore, the payment method used under the old laws, that is, the Central Excise Act, 1944 and the Finance Act, 1994 cannot be used for payment under the CGST Act,” the officer said.

After going through all the arguments and the facts place on the record, the court felt it does appear that the confusion seems to be because there was no proper legal provision to accept payment of pre-deposit. Accordingly, it asked the CBIC to clear the air immediately. In the instruction, the 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 the CGST Act.

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