Karnataka High Court
M/S. Vk Building Services Private … vs The Additional Commissioner Of Gst on 14 August, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No. 21409 of 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF AUGUST, 2025
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 21409 OF 2025 (T-RES)
BETWEEN:
M/S. VK BUILDING SERVICES PRIVATE LIMITED
(A COMPANY REGISTERED UNDER THE COMPANIES
ACT, 1956 AND ALSO UNDER THE PROVISION OF
CGST/SGST ACT, 2017), M.142, GROUND FLOOR,
9TH 'A' MAIN, LIC COLONY, HAL III STAGE,
J.B.NAGAR, BENGALURU - 560 075.
REPRESENTED BY ITS GENERAL MANAGER
(COMMERCIAL AND FINANCE)
SHRI. HARISH SEKAR,
S/O LATE SRI SEKAR KRISHNAMACHARI,
AGED ABOUT 36 YEARS.
...PETITIONER
(BY SRI.MALLIKARJUN N. K., ADVOCATE FOR
Digitally signed SRI.SAMPATH A., ADVOCATE)
by NAGAVENI
Location: HIGH AND:
COURT OF
KARNATAKA
1. THE ADDITIONAL COMMISSIONER OF GST,
APPEALS I,
OFFICE OF THE COMMISSIONER
OF CENTRAL TAX GST APPEALS-I
TRAFFIC AND TRANSIT MANAGEMENT CENTER,
BMTC BUILDING, 4TH FLOOR,
ABOVE BMTC BUS STAND,
DOMLUR, OLD AIRPORT ROAD,
BENGALURU - 560 071.
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2. DEPUTY COMMISSIONER OF CENTRAL TAX,
GST, COMMISSIONERATE,
EAST, OLD AIRPORT ROAD,
DOMLUR, BENGALURU - 560 071.
AMENDED VIDE COURT ORDER DATED 29.07.2025.
...RESPONDENTS
(BY SRI. JEEVAN J.NEERALGI, ADVOCATE)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER DTD 11.12.2023 PASSED BY THE
RESPONDENT IN APPEAL IN GST A.NO.277/2023 GST ADC A1
VIDE ANNX-F AND ETC.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA
ORAL ORDER
Petitioner is before this Court calling in question an order
dated 11.12.2023 by which the appeal filed by the petitioner
comes to be rejected on the score that the pre-deposit amount
that is necessary for entertaining an appeal is paid by electronic
mode and not otherwise by way of cash.
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2. Heard Sri.Mallikarjun N.K., learned counsel
appearing for the petitioner, Sri.Jeevan J Neeralgi, learned
counsel appearing for the respondents and have perused the
material on record.
3. Learned counsel appearing for the petitioner
submits that an identical issue comes up before the Gujarat
High Court in YASHO INDUSTRIES LTD., vs. UNION OF
INDIA reported in (2025) 143 GSTR 553 (Guj), the Gujarat
High Court goes in detail and sets aside the order of the
appellate authority which declines to accept the predeposit in
terms of Section 107(6)(b) of the Central Goods and Services
Tax Act, 2017 which was made by electronic credit ledger. The
Gujarat High Court holds that the electronic transfer must be
considered to be valid and the impugned order passed by the
Appellate Authority therein was rendered unsustainable. The
Gujarat High Court has held as follows:
“2. By way of this petition under article 226 of the
Constitution of India, the writ applicant has approached
this court with the following reliefs:
“(a) issue an appropriate writ of mandamus or any
other writ, order or direction quashing and setting
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aside the impugned letter dated April 25, 2023
(Annexure B) in so far as it has been issued
arbitrarily and in violation of article 14 of the
Constitution;
(b) direct respondents to consider the amount of INR
3,36,82,000 paid by the petitioner-company,
towards the mandate of pre-deposit, vide form
GST DRC 03 dated February 9, 2021 and
December 26, 2022 is sufficient compliance of
section 107(6)(b) of the CGST Act and
corresponding provisions of the IGST Act;
(c) pending final hearing and disposal of this petition,
restraint the respondents from passing any final
orders in relation to Appeal No. 11/GST/CP/22-
23, dated December 28, 2022, preferred by the
petitioner-company before Commissioner
(Appeals) CGST and Central Excise Appeals
Commissionerate, Surat;
(d) alternatively, direct respondents to refund INR
3,36,82,000 paid vide form GST DRC-03 dated
February 9, 2021 and December 26, 2022
(Annexure A);
(e) grant ex parte ad interim relief in terms of prayer
clauses (c); and
(f) grant any other and further relief which this
honourable court may deem fit and proper in the
facts of the present case.”
3. The brief facts leading to filing of the present petition
can be stated as under:
3.1 The petitioner is public limited company engaged in
the business of manufacturing and exporting specialized
chemicals such as aroma chemicals, food antioxidants,
rubber chemicals and lubricant additives. A substantial
portion of the petitioner’s products is also exported
resulting in significant contribution to the foreign
exchange earnings of the country.
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3.2 During February 28, 2018 to January 14, 2021, the
petitioner-company was availing refund of IGST paid on
exports in terms of section 16(3)(b) of the Integrated
Goods and Services Tax Act, 2017 (“IGST” Act, for short)
as it stood prior to its omission by Finance Act, 2021
besides the IGST exemption conferred by Notification No.
79/2017-Cus., dated October 13, 2017 on import of raw
materials incorporated in the manufacture of
export/exported goods on the strength of validity issued
Advance Authorization Licenses.
3.3 The petitioner-company was precluded from availing
benefits of rebate in terms of section 16(3)(b) of the
IGST Act if imported goods enjoyed exemptions
conferred by NN 79/2017 since October 9, 2018 vide
introduction of rule 96(10) of the Central Goods and
Services Tax Rules, 2017 (“CGST” Rules, for short) read
with Notification No. 54/2018-C.T., dated October 9,
2018.
3.4 Aggrieved by the arbitrariness of the aforesaid
precluding provision and corresponding notifications, the
petitioner had preferred a writ petition before the
Bombay High Court bearing W.P. (L) No. 8839 of 2020
which is pending. Parallelly, the petitioner was compelled
to depart from INR 3 crore and reverse, “under protest”,
the input-tax credit equivalent to INR 3 crore vide form
GST DRC-03.
3.5 Thereafter, the respondent continued to pursue their
investigation and as a consequence thereof searches
were conducted at the premises of the petitioner-
company. Thereafter, after recording the statement of
Director of the company and upon completion of the
investigation, a show-cause notice dated March 16, 2022
was issued demanding the refunded IGST in terms of
section 16(3)(b) of the IGST Act along with interest and
penalty.
3.6 The petitioner vide detailed reply dated May 23,
2022 and personal hearings dated July 19, 2022 and
August 10, 2022 submitted that the matter was Revenue
neutral, reversal of IGST exemption for the period from
October 2019 to September, 2021 had been effectuated
in absence of any contravention of rule 96(10) of the
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CGST Rules. However, the respondents vide order dated
September 20, 2022 had confirmed the show-cause
notice dated March 16, 2022 demanding of tax, penalty
and interest.
3.7 Aggrieved by the aforesaid order, the petitioner had
preferred appeal before the Commissioner (Appeals)
bearing No. 11/GST/CP/22-23 and also deposited the
pre-deposit amount to the tune of Rs. 3,36,82,000 in
compliance of section 107(6)(b) of the CGST Act utilizing
the amount available in the electronic credit ledger vide
form GST DRC-03 dated December 26, 2022. However,
respondent No. 2 vide impugned letter April 25, 2023
directed the petitioner to pay the pre-deposit through
electronic cash ledger and also directed to produce the
relevant proof regarding the same before or at the time
of attending the personal hearing in the matter.
Being aggrieved by the aforesaid letter, the petitioner
approached this court by way of present petition.
4. The learned advocate Mr. Rastogi for the petitioner
stated that the issue is squarely covered by the decision
of this court dated November 30, 2023 in Special Civil
Application No. 22979 of 2022 [Shiv Crackers v. Chief
Commissioner of CGST and C.E., (2025) 143 GSTR 545
(Guj).] . It was submitted that the similar order is
required to be passed in this petition.
5. In view of the above, it would be germane to
reproduce the relevant paras of order dated November
30, 2023 [Shiv Crackers v. Chief Commissioner of CGST
and C.E., (2025) 143 GSTR 545 (Guj).] passed by this
court which read as under (page in 125 GSTR):
“10. Having heard the learned advocates appearing
for the respective parties and having gone through the
material produced on record, the only question that falls
for the consideration of this court is whether the
appellant, to comply with the requirement of sub-section
(6) of section 107 of the CGST Act of paying a sum equal
to ten per cent. of the amount of tax in dispute arising
out of the impugned order, can pay the amount utilizing
the credit available in the electronic credit ledger ?
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11. In our considered opinion, the aforesaid question
is no more res integra. The honourable Bombay High
Court in the case of Oasis Realty [Oasis Realty v. Union
of India, (2023) 120 GSTR 755 (Bom); (2022) 1 HCC
(Bom) 126.] , having considered the relevant provisions,
held as under (pages 761-763 in 120 GSTR):
‘9. We are not in agreement with the submission made on
behalf of the State. This is because clause (b) of sub-section
(6) of section 107 provides a precondition, “unless the
appellant has paid” (not deposited) a sum equal to ten per
cent. of remaining amount of tax in dispute. It says ten per
cent. of tax has to be paid as a precondition. That tax can be
integrated tax or Central tax or the State tax as in the case at
hand, or Union Territory tax. The amount of ITC available in
the electronic credit ledger can be utilised towards payment of
integrated tax or Central tax or State tax or Union Territory
tax.
Therefore, in our view, petitioner having to pay ten per
cent. of the tax in dispute under clause (b) of sub-section (6)
of section 107, can certainly utilise the amount of ITC available
in the electronic credit ledger. We hasten to add that in view of
provisions of sub-section (3) of section 49, the party may also
pay this ten per cent. of the tax in dispute by utilising the
amount available in the cash ledger.
10. Moreover, sub-section (4) of section 49 provides the
amount available in the electronic credit ledger may be used
for making any payment towards output tax under the MGST
Act or IGST Act subject to certain restrictions or conditions that
may be prescribed. Sub-rule (2) of rule 86 of the MGST Rules
provides for debiting of the electronic credit ledger to the
extent of discharge of any liability in accordance with the
provisions of section 49 of the MGST Act. Further, output tax in
relation to a taxable person is defined in clause (82) of section
2 of the MGST Act as the tax chargeable on taxable supply of
goods or services or both but excludes tax payable on reverse
charge mechanism. Therefore, any payment towards output
tax, whether self-assessed in the return or payable as a
consequence of any proceeding instituted under the MGST Act
can be made by utilisation of the amount available in the
electronic credit ledger. Hence, a party can pay ten per cent. of
the disputed tax either using the amount available in the
electronic cash ledger or the amount available in the electronic
credit ledger.
Ms. Chavan relied upon an order of the High Court of
Orissa at Cuttack in Jyoti Construction v. Deputy Commissioner
of CT and GST [(2022) 96 GSTR 17 (Orissa); 2021 SCC OnLine
Ori 1511; (2021) 10 TMI 524.] to submit that the amount in
the credit ledger cannot be used to pay the ten per cent.
required to be paid under sub-section (6) of section 107 of the
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MGST Act. In our view it will not be necessary to discuss the
said order because subsequent to the said order the Central
Board of Indirect Taxes and Customs, GST Policy Wing,
Department of Revenue, Ministry of Finance, Government of
India (CBIT and C) has, in exercise of its powers conferred by
section 168(1) of the Central Goods and Services Tax Act,
2017, issued clarification in the form of a circular. This
clarification came to be issued in view of various
representations that CBIT and C received on utilisation of the
amounts available in the electronic credit ledger and the
electronic cash ledger for payment of tax and other liabilities.
The CBIT and C, in its circular F. No. CBIC-20001/2/2022-GST,
dated July 6, 2022 has clarified as under:
Utilisation of the amounts available in the electronic credit ledger and the
electronic cash ledger for payment of tax and other liabilities.
1-5…
6. Whether the amount 1. In terms of sub-section (4) of section 49 of
available in the the CGST Act, the amount available in the
electronic credit ledger electronic credit ledger may be used for making
can be used for making any payment towards output tax under the
payment of any tax CGST Act or the Integrated Goods and Services
under the GST Laws ? Tax Act, 2017 (hereinafter referred to as “IGST
Act“), subject to the provisions relating to the
order of utilisation of input-tax credit as laid
down in section 49B of the CGST Act read with
rule 88A of the CGST Rules.
2. Sub-rule (2) of rule 86 of the CGST Rules
provides for debiting of the electronic credit
ledger to the extent of discharge of any liability
in accordance with the provisions of section 49
or section 49A or section 49B of the CGST Act.
3. Further, output tax in relation to a taxable
person, (i.e., a person who is registered or
liable to be registered under section 22 or
section 24 of the CGST Act) is defined in clause
(82) of section 2 of the CGST Act as
the tax chargeable on taxable supply of goods
or services or both but excludes tax payable
on reverse charge mechanism.
4. Accordingly, it is clarified that any payment
towards output tax, whether self-assessed in
the return or pay-able as a consequence of
any proceeding instituted under the provisions
of GST Laws, can be made by utilization of
the amount available in the electronic credit
ledger of a registered person.
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5. It is further reiterated that as output tax
does not include tax payable under reverse
charge mechanism, implying thereby that the
electronic credit ledger cannot be used for
making payment of any tax which is payable
under reverse charge mechanism.
7. Whether the As per sub-section (4) of section 49, the
amount available in electronic credit ledger can be used for
the electronic credit making payment of output tax only under the
ledger can be used CGST Act or the IGST Act. It cannot be used
for making for making payment of any interest, penalty,
payment of any fees or any other amount payable under the
liability other than said acts. Similarly, electronic credit ledger
tax under GST Laws cannot be used for payment of erroneous
? refund sanctioned to the taxpayer, where
such refund was sanctioned in cash.
8. Whether the As per sub-section (3) of section 49 of the
amount available in CGST Act, the amount available in the
the electronic cash electronic cash ledger may be used for
ledger can be used making any payment towards tax, interest,
for making penalty, fees or any other amount payable
payment of any under the provisions of the GST Laws.
liability under the
GST Laws ?
Therefore, CBIT and C has itself clarified that any
amount towards output tax payable, as a consequence
of any proceeding instituted under the provisions of
GST Laws, can be paid by utilisation of the amount
available in the electronic credit ledger of a registered
person. The CBIT and C has also requested that
suitable trade notices be issued to publicize the
contents of the circular.’
12. Keeping in mind the ratio laid down by the
honourable Bombay High Court in the case of Oasis
Realty [Oasis Realty v. Union of India, (2023) 120
GSTR 755 (Bom); (2022) 1 HCC (Bom) 126.] as well as
the Circular dated July 6, 2022 issued by the GST Policy
Wing, Central Board of Indirect Taxes and Customs,
Ministry of Finance, Government of India, it has been
clarified that the payment of pre-deposit can be made
by utilizing the Electronic Credit Ledger (ECL).
13. In view of the aforesaid, we hold that the
petitioner may utilize the amount available in the
electronic credit ledger to pay the ten per cent. of tax
in dispute as prescribed under sub-section (6) of
section 107 of the CGST Act. Accordingly, the impugned
order-in-Appeal No. CR/ADC/APL/147/2022, dated July
25, 2022 passed by respondent No. 2 is hereby
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quashed and set aside. The appeal is restored to file on
the undertaking of the petitioner that it shall debit the
electronic credit ledger within two weeks of this order
getting uploaded towards this ten per cent. payable
under section 107(6)(b), if not already debited, is
accepted.
14. The petition is disposed of accordingly.”
6. Considering the facts of the present case, the amount
paid by the petitioner as pre-deposit in compliance of
section 107(6)(b) of the CGST Act utilizing the amount of
electronic credit ledger is required to be considered valid
and impugned letter dated April 25, 2023 issued by
respondent No. 2 directing the petitioner to pay pre-
deposit amount through electronic cash ledger is
therefore, hereby quashed and set aside. Therefore, the
appeal filed by the petitioner is required to be heard on
merits by considering the payment of pre-deposit by the
petitioner from electronic credit ledger as a sufficient
compliance of the provisions of section 107(6)(b) of the
CGST Act. The petition is accordingly disposed of.”
4. The said order of the Gujarat High Court was tossed
by the Union of India before the Apex Court only to be rejected
by affirming the findings rendered by the Division Bench of the
High Court of Gujarat by the following order:
“2. In Special Leave Petition (C) Nos. 25437/2023
and 324/2024, the assessees have preferred the petitions
before this court which have been entertained. When the
Revenue has preferred Special Leave Petition (C) D. No.
508/2025, reliance has been placed on the fact that the
assessee’s petitions have been entertained by this court
and therefore on that basis notices were issued in the
case of Chief Commissioner of CGST and C.E. v. Shiv
Crackers.
3. Today, Shri Abhishek A Rastogi, learned counsel
for the respondent/caveator has brought to our notice the
fact that initially notices were issued by this court in the
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special leave petitions filed by the assessees. The
respondent(s) ought not to have relied upon those cases
for the purpose of seeking notice(s) in their petitions also.
In the circumstances, he submitted that there is no merit
in this special leave petition. He also brought to our notice
the fact of the rule 96(10) of the CGST has been deleted
in the year 2024.
4. We have heard learned counsel for the
petitioner(s)/Department. The Department’s contention is
that since similar matters are pending before this court,
this case also may be tagged with those cases.
5. As already noted, the aforesaid cases initially
filed before this court are of the assessees and not of the
Department. In the circumstances, we find that the
impugned order passed by the High Court in R/SCA No.
10504 of 2023 [ Reported as Yasho Industries Limited v.
Union of India, (2025) 143 GSTR 553 (Guj).] would not
call for any interference. Hence, the special leave petition
is dismissed.”
5. In the light of the issue standing covered by the
judgment rendered by the High Court of Gujarat as affirmed by
the Apex Court, the issue in the subject case need not detain
this Court for long or delve any further deep into the matter.
The petition deserves to succeed with the obliteration of the
order of the Appellate Authority and the restoration of the
appeal filed by the petitioner on the file of the Appellate
Authority.
6. For the aforesaid reasons, the following:
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ORDER
[i] The order dated 11.12.2023 passed by the 1st
respondent in appeal in GST A.NO.277/2023 GST ADC A1
stands quashed.
[ii] The appeal filed by the petitioner in FORM GST APL-
01 dated 29.6.2022 stands restored.
[iii] The Appellate Authority shall answer the appeal on
its merit and take the issue to its logical conclusion.
Ordered accordingly and Writ Petition is allowed.
Sd/-
(M.NAGAPRASANNA)
JUDGE
CBC
List No.: 1 Sl No.: 37
CT:SS