The Karnataka High Court has restored a GST appeal that was rejected because the taxpayer initially fell short of the mandatory pre-deposit by ₹1,800 due to an inadvertent computational error.
The bench of Justice B.M. Shyam Prasad observed that the GST appellate authority had adopted a “pedantic approach” while applying Section 107 of the Central Goods and Services Tax Act, 2017. The Court held that such an approach undermined the statutory appellate remedy available to the taxpayer.
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The Petitioner/assessee challenged a show cause notice dated April 28, 2023, an Order-in-Original dated July 17, 2023, an appellate order dated August 30, 2025, and a subsequent rectification order dated May 13, 2026.
The original proceedings had been initiated under Section 74 of the CGST Act and the corresponding provisions of the Karnataka Goods and Services Tax Act, 2017. Section 74 deals with the determination of tax that has not been paid, has been short-paid, or has been wrongly refunded, as well as input tax credit wrongly availed or utilised by reason of fraud, wilful misstatement or suppression of facts.
The taxpayer submitted before the High Court that its grievance would be adequately addressed if the appellate order was reconsidered.
According to the taxpayer, the appeal had been filed within the prescribed limitation period and the mandatory pre-deposit had also substantially been made. However, an inadvertent error in calculating the amount resulted in a shortfall of ₹1,800.
The differential amount was subsequently deposited after the mistake came to the taxpayer’s notice. By that time, however, the period of 120 days contemplated under Section 107 of the CGST Act had expired.
The appellate authority declined to entertain the appeal on the ground that the entire mandatory pre-deposit had not been paid within the permissible period. The taxpayer maintained that the error was bona fide and that the outstanding amount was deposited at the earliest opportunity after the mistake was discovered.
The High Court examined Section 107(6) of the CGST Act, which prescribes the payment requirements for filing an appeal against an adjudication order.
Under the provision, an appellant is required to pay in full the portion of tax, interest, fine, fee and penalty admitted to be payable. In addition, the appellant must deposit a sum equal to 10% of the remaining disputed tax, subject to the statutory monetary ceiling.
The Court noted that an appellant is required to offer 10% of the remaining disputed tax as the mandatory pre-deposit. In the present case, the taxpayer had substantially deposited the required amount, but the initial payment was deficient by ₹1,800.
The remaining amount was subsequently paid after the computational error was noticed.
Taking note of the peculiar facts, the High Court found that the appellate authority had applied Section 107 in an excessively technical manner.
The Court observed that Section 107(4) permits an appeal to be filed within three months and authorises the appellate authority to condone a further delay of one month upon sufficient cause being shown.
However, the taxpayer’s appeal was not rejected because the appeal itself had been filed late. It was declined because a small part of the mandatory pre-deposit was deposited after the outer limitation period due to an admitted calculation error.
“The pedantic approach undermines the appellate remedy,” the High Court observed while granting relief to the taxpayer on this limited ground.
The Court did not adjudicate the merits of the tax demand or the allegations contained in the proceedings under Section 74. Its intervention was confined to the rejection of the statutory appeal on account of the ₹1,800 pre-deposit shortfall.
The High Court allowed the writ petition and set aside the Order-in-Appeal. It restored the taxpayer’s appeal for a fresh decision on merits by the GST appellate authority.
Consequently, the Court also quashed the rectification order noting that it was merely a reiteration of the appellate order.
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