• Dated 30^th June, 2026

Amount Paid Under Protest Can Be Adjusted Towards Mandatory Pre-deposit for Filing GST Appeal: Bombay High Court

BRIEF FACTS:

The Assessee challenged an adjudication order raising GST demand for the period from October 2018 to March 2022. While the dispute was pending, the Assessee had, as a matter of abundant caution, started collecting and depositing Tax Collected at Source (TCS) under protest with effect from 1 April 2021 in respect of the disputed transactions. The Adjudicating Authority excluded the TCS already paid while quantifying the tax demand. During the pendency of the writ petition, the Bombay High Court directed the Assessee to deposit 10% of the disputed tax amount as a condition for pursuing the statutory appeal. The Assessee thereafter sought modification of the order, contending that the amount of TCS already deposited under protest ought to be adjusted against the mandatory pre-deposit prescribed under Section 107(6)(b) of the CGST Act.

ASSESSEE'S CONTENTION:

The Assessee submitted that the amount deposited under protest prior to the adjudication order formed part of the disputed tax liability and could not be ignored while determining compliance with the mandatory pre-deposit requirement. It was argued that once such payment had already been made in respect of the very demand under challenge, insisting on a further deposit would amount to requiring payment twice over. Reliance was placed on the Supreme Court's decision in VVF (India) Ltd., wherein it was held that amounts deposited before the assessment order cannot be excluded while computing the statutory pre-deposit in the absence of any express provision to that effect. Since the Assessee had already deposited more than ₹30.81 crore under protest, which exceeded the statutory cap of ₹20 crore prescribed under Section 107(6)(b), no further pre-deposit could be insisted upon.

DEPARTMENT'S CONTENTION:

The Department contended that payment of TCS from April 2021 amounted to an admission of tax liability for the relevant period and could not be treated as payment towards a disputed demand. It was argued that the GST law does not recognize payment of tax "under protest" and, therefore, the amount already paid could not be adjusted towards the statutory pre-deposit required for filing an appeal. Accordingly, the Department submitted that the Assessee was still required to comply with the mandatory requirement of depositing 10% of the disputed tax under Section 107(6)(b) of the CGST Act.

DECISION:

The Bombay High Court accepted the Assessee's contention and modified its earlier order. The Court observed that it was undisputed that the Assessee had collected and deposited TCS under protest during the very period covered by the disputed demand and that such amount had already been excluded while determining the tax liability in the adjudication order. Relying upon the Supreme Court's judgment in VVF (India) Ltd., the Court held that, in the absence of any statutory provision excluding payments made before the assessment order, such amounts must be taken into account while verifying compliance with the mandatory pre-deposit requirement. Since the Assessee had already deposited ₹30.81 crore under protest, which exceeded the maximum pre-deposit of ₹20 crore prescribed under Section 107(6)(b), the statutory requirement stood satisfied. Accordingly, the Court held that no further pre-deposit could be insisted upon and directed that the petition be heard on merits.

BTA's COMMENT:

This order provides welcome relief to taxpayers who have deposited tax during investigation or before adjudication and are subsequently required to comply with the mandatory pre-deposit for filing an appeal. The Court has reaffirmed that the purpose of Section 107(6) is to secure the disputed tax and not to compel an Assessee to make duplicate deposits in respect of the same liability. By following the Supreme Court's decision, the Bombay High Court has clarified that amounts already paid before the assessment order, including payments made under protest, cannot be disregarded while determining whether the statutory pre-deposit requirement has been fulfilled, unless the statute expressly provides otherwise. The ruling is likely to be relied upon in cases where taxpayers seek adjustment of payments made during investigation or prior to adjudication against the mandatory pre-deposit requirement.

Case Reference -NCDEX e Markets Ltd. v. Union of India (Interim Application No. 81 of 2026 in Writ Petition No. 3121 of 2024, Bombay High Court, decided on 05 May 2026)

Author- Shristy Pathak

Edited by- Madhurima Bose