No Pre-Deposit Of Disputed GST Interest Required When Entire Tax Is Paid: Bombay High Court

On 27 October, the Bombay High Court held that no pre-deposit of disputed GST interest is required when the entire tax amount has been paid, and that recovery of the remaining dues is deemed to be stayed once the statutory requirements for filing an appeal before the GST Appellate Tribunal are satisfied.

A Bench comprising Justices M.S. Karnik and Sandesh D. Patil allowed three writ petitions filed by Roadway Solutions India Infra Ltd. challenging recovery proceedings for approximately Rs. 22.12 crore towards interest on delayed GST payments. The judges observed:

“Perusal of Section 107(6) and Section 112(8) of the CGST/MGST Act make it clear that there is no requirement of pre-deposit of interest, when entire amount of tax has been paid.”

The dispute arose after the GST Department demanded interest from Roadway Solutions India Infra Ltd., which undertakes highway and road construction and maintenance, for delayed GST payments during certain tax periods. Although the company had paid the entire tax amount, the Adjudicating Authority confirmed the interest demand, which the First Appellate Authority subsequently upheld.

The company challenged the demand before the GST Appellate Tribunal. While the appeal was pending, the Department issued recovery notices to various banks under Section 79(1)(c) of the Central Goods and Services Tax (CGST) Act.

Before the High Court, the company argued that Sections 107(6) and 112(8) require a percentage-based pre-deposit of the disputed tax but do not mandate any pre-deposit when the dispute concerns only interest and the entire tax has been paid. The Department contended that interest on delayed GST payments arises under Section 50 of the Act and remains payable even after the tax is paid.

The Bench held that the percentage-based pre-deposit requirement does not extend to disputed interest alone when the entire tax has been paid. It observed:

“We therefore have no hesitation in holding that the percentage-based pre-deposit prescribed by Section 112(8)(b) does not extend to disputed interest alone, especially when the entire tax has been paid.”

Further, the judges held that Sections 107(7) and 112(9) provide for a deemed stay on recovery of the remaining dues once an appeal is filed after the applicable pre-deposit requirements are met. Since the company had paid the entire tax and the Tribunal had accepted its appeal without requiring a pre-deposit of interest, the recovery proceedings violated Section 112(9) of the CGST/MGST Acts. They observed:

“We therefore have no hesitation in holding that the recovery initiated is in the teeth of the provisions of Section 112(9) of the CGST/MGST Act.”

Accordingly, the High Court quashed the recovery proceedings.

For the Petitioner: Senior Advocate Darius Shroff, along with Advocates Parag Khandhar, Kiran Chavan and Tapan Radkar, instructed by Cenex Legal LLP.

For the Respondent-State: Additional Government Pleader Shruti D. Vyas, along with Assistant Government Pleader A.R. Deolekar