Trader Can’t Be Labelled Defaulter Over Unpaid Demand During Pendency Of GST Appeal, After Making Pre-Deposit: Delhi High Court
The Delhi HIgh Court has held that once a trader prefers an appeal against a demand raised by the GST Department and makes the mandatory pre-deposit, the demand order is automatically stayed and the trader cannot be treated as a defaulter.
A division bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta thus granted relief to the Petitioner-proprietorship firm and directed the Department to process its request for a fresh GST registration.
Briefly, Petitioner had a GST registration in respect of which a demand of Rs.21,72,324/- was raised by the Department. However, the said GST registration was cancelled due to disruption of work in the wake of COVID-19.
Subsequently, when the Petitioner sought a fresh GST registration in his favour, the Department said the same cannot be granted until the demand raised qua the previous GST registration is satisfied.
The Department refused NOC for a fresh registration and declared that Petitioner is a defaulter.
Petitioner on the other hand claimed that its appeal against the demand order is pending before the appellate authority where requisite pre-deposit has also been made.
The Department contended that even if the appeal has been filed, the NOC would be given only if the entire demand is paid.
Disagreeing with such an approach, the High Court said,
“once an appeal has been filed by the Petitioner and the mandatory pre-deposit has been paid, the impugned Order-in-Original shall stand automatically stayed in view of the operation of Section 107(7) of the Central Goods and Service Tax Act, 2017. Thus, the Petitioner can no longer be treated as a defaulter and the NOC cannot be withheld merely on the ground that the said demand which is under challenge has not been paid.”
The High Court said since the demand order is under challenge, it cannot be deemed to have reached finality. Thus, the Petitioner cannot continue to be treated as a defaulter during the pendency of the appeal.
The Department was accordingly directed to process the application for fresh GST Registration filed by the Petitioner and issue NOC with respect to the same.
Appearance: Mr. Chandra Datt Joshi, Advocate for Petitioner; Mr. Harpreet Singh, SSC with Mr. Jai Ahuja and Ms. Vanshika Kapoor, Advocates. Ms. Avni Singh, Advocate for R/GNCTD.
Case title: Shri Sarabjeet Singh , Proprietor Of M/S Khurana Associates v. The Commissioner Of SGST, Delhi SGST & Ors.
Case no.: W.P.(C) 10392/2025