In a recent ruling, the Karnataka High Court directed the Goods and Services Tax ( GST ) Act department to treat the prematurely debited 10% amount from the petitioner’s electronic credit ledger as a pre-deposit for the appeal, as the debit was made before the completion of the statutory appeal period. Indian Potash Limited, the petitioner, is a company registered under the Companies Act, 1956. The petitioner received a notice dated January 23, 2024, and an endorsement dated February 9, 2024, from the respondent. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now Under the Karnataka Goods and Services Tax (KGST) Act, the petitioner company was entitled to a four-month appeal period (until April 22, 2024). Before this appeal period expired, the GST department issued a notice on January 23, 2024, demanding payment to the petitioner.

Following the notice, an endorsement was issued on February 9, 2024, demanding the payment. The petitioner saw this early notice and endorsement as a violation of their right to the full appeal period. Being aggrieved, the petitioner challenged the notice and endorsement in court, arguing that they were premature and in violation of the appeal period granted under the Karnataka Goods and Service Tax Act. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now The petitioner’s counsel argued that the GST department’s actions were arbitrary and breached their statutory right to appeal within the permitted time frame. They requested that the 10% of the disputed tax amount, which the GST department had debited from their electronic credit ledger between March 1 and March 20, 2024, be recognized as a pre-deposit to support their appeal.

The respondent’s counsel opposed the petitioner’s argument and submitted that the notice and endorsement were lawful and that the petition should be dismissed. Justice S.R. Krishna Kumar heard both side’s arguments and acknowledged the petitioner’s right to file an appeal within the four-month period from December 22, 2023, as per Section 107 of the KGST Act. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now The court noted that the notice and endorsement lacked any recorded reasons for an early demand, which conflicted with the requirement under Section 78 of the KGST Act to justify a premature recovery effort.

Therefore, the court quashed the impugned notice dated January 23, 2024, and the endorsement dated February 9, 2024, and permitted the petitioner to file an appeal before the Appellate Authority on or before April 22, 2024. The court directed AA to use the 10% debited amount from the petitioner’s electronic credit ledger as a pre-deposit for the appeal and to dispose of the appeal without requiring further deposits. The writ petition was allowed.