The Punjab and Haryana High Court has held that once a taxpayer files a statutory appeal under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017 and complies with the mandatory pre-deposit requirement, the tax authorities cannot continue to enforce the disputed demand.
The bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor also recorded the State’s assurance that the blocked Input Tax Credit (ITC) would be restored within two weeks, thereby granting significant interim relief to the taxpayer.
The petitioner/assessee initially challenged the blocking of its Input Tax Credit by the State GST authorities. During the pendency of the writ proceedings, however, the authorities issued a show cause notice, followed by an adjudication order and demand notice. The company subsequently challenged the order by filing a statutory appeal under Section 107 of the CGST Act before the appellate authority.
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The assessee argued that after the adjudication order was passed, it exercised its statutory remedy by filing an appeal under Section 107 of the CGST Act. In compliance with Section 107(6), the company deposited 10% of the disputed tax demand, which is the mandatory pre-condition for admission of an appeal.
Since the appeal had already been entertained by the appellate authority, the company contended that the continued blocking of its Input Tax Credit was contrary to the statutory scheme governing GST disputes. It therefore sought immediate revocation of the ITC blockage.
The court observed that the statutory framework clearly protects an appellant once the appeal has been admitted after compliance with the prescribed pre-deposit requirement.
The Court noted that it was undisputed that the appeal had been filed, the mandatory 10% pre-deposit had been made, and the appeal had been entertained. In such circumstances, the Bench held that under the statutory scheme, the disputed demand could not be enforced against the petitioner during the pendency of the appeal.
During the hearing, counsel appearing for the State, on instructions from the concerned State Tax Officers, informed the Court that the blockage of Flipkart’s Input Tax Credit would be revoked within two weeks.
Taking note of this statement, the High Court observed that the assurance sufficiently protected the petitioner’s interests. Consequently, the Court disposed of the writ petition while leaving all other issues arising from the adjudication order open to be decided in the pending statutory appeal.
The decision reinforces the statutory protection available to taxpayers under the GST appellate framework. It underscores that once an appeal is validly instituted and the mandatory pre-deposit has been made, recovery proceedings in respect of the disputed demand cannot ordinarily continue.
The ruling also highlights that blocking of Input Tax Credit cannot be sustained where the statutory appeal mechanism has been invoked and the taxpayer has fulfilled the conditions prescribed under the CGST Act, thereby ensuring that appellate remedies remain meaningful and effective.
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