1 November 2022
Manner of payment of pre-deposit for cases pertaining to Central Excise and Service Tax
As directed by the Hon‘ble Bombay High Court in the matter of Sodexo India Services Pvt Ltd vs Union of India and Others1 , the Central Board of Indirect Taxes and Customs (CBIC) has examined the issue regarding the manner of payment of pre-deposit for filing appeals and has issued Instruction no. CBIC-240137/14/2022-Service Tax Section-CBEC dated 28 October 2022, which provides the following:
  • Payment of pre-deposit for matters under the Central Excise Act, 1944, and the Finance Act, 1994 (erstwhile laws) shall be made only through the CBIC-GST Integrated Portal, i.e., https://cbic-gst.gov.in
  • Payment made through DRC-03 under Goods and Services Tax (GST) regime is not a valid mode of payment for making pre-deposit for matters related to erstwhile laws and even under the GST regime.
  • The settled principle of law has been re-iterated that pre-deposit is neither in the nature of duty nor can be treated as arrears of tax, it is merely a requirement for exercising the right to appeal. Accordingly, pre-deposit for matters under the erstwhile law cannot be covered under the transitional provisions of the CGST Act.
1 Writ petition No. 6220 of 2022  
Our Comments
Owing to the rejection of appeals for non-compliance of pre-deposit requirements where payments were made through DRC-03, this instruction certainly clears the anomaly revolving around the correct manner of making payment of pre-deposit for matters pertaining to erstwhile laws.

By applying the ratio laid down in the Sodexo case (supra), unnecessary litigation can be surely reduced, whereby appeals were merely rejected on account of payment of pre-deposit being made through DRC-03.

It is noteworthy that certain High Courts have accepted the payment of pre-deposit through DRC-03 by utilization of cash and credit ledger balances. However, it will be interesting to see how the instruction would now be implemented by the appellate authorities or interpreted in the following cases:
  1. Where the assessee has already made the pre-deposit vide DRC-03 and the appeal is not admitted
  2. Where the appeal is admitted and the deposit has already been made through DRC-03
  3. If the appeal is rejected on account of non-acceptance of pre-deposit paid through DRC-03, will the assessee be allowed to claim a refund of such deposit made?
While the instruction will be a guide for making payment of pre-deposit going forward, the validity of payments made to date is a question yet to be answered!
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