In a landmark ruling, the Delhi High Court permits the utilization of transitioned CENVAT credit for pre-deposit under the GST regime, allowing the Army Welfare Housing Organisation to proceed with its appeal.
In a significant ruling, the Delhi High Court on December 22, 2025, has allowed the Army Welfare Housing Organisation to utilize its transitioned CENVAT credit for making a pre-deposit under the Goods and Services Tax (GST) regime. This decision comes as a relief to the petitioner, a charitable organization, which faced a service tax demand of approximately Rs. 84.95 crore, along with penalties.
The petitioner had initially filed an appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT), which was dismissed due to non-compliance with the pre-deposit requirement. The petitioner sought to use transitioned CENVAT credit via Form DRC-03 for this purpose, a method not previously accepted by CESTAT, leading to the dismissal of their appeal.
The bench, comprising Justices Prathiba M. Singh and Shail Jain, examined the provisions under Section 140 of the Central Goods and Services Tax Act, 2017, and Rule 142(3) of the CGST Rules, which allow for the transition and utilization of CENVAT credit for tax, interest, or penalty payments. The court emphasized that pre-deposit is an advance deposit of the demanded amount and should be considered under the same provisions.
The court acknowledged the unique status of the Army Welfare Housing Organisation as a no-profit, no-loss entity focused on providing affordable housing to army personnel and their families. Given this context, the court deemed it appropriate to allow the use of transitioned CENVAT credit for pre-deposit, highlighting the rare nature of this case.
This decision aligns with previous judgments from the Gujarat High Court and Bombay High Court, which have similarly allowed the use of electronic credit ledgers for pre-deposit purposes under the GST regime. The court's order mandates the petitioner to file Form DRC-03 within 15 days, ensuring compliance with the pre-deposit requirement, thus enabling the restoration of their appeal before CESTAT.
The ruling underscores the court's interpretation of GST transitional provisions, emphasizing the continuity of rights and credits from the pre-GST era into the new tax regime. This judgment not only provides immediate relief to the petitioner but also sets a precedent for similar cases where transitioned credits could be utilized for pre-deposit requirements under GST.
Bottom Line:
GST Law - Utilization of transitioned CENVAT credit for pre-deposit under GST regime is permissible. Pre-deposit is considered as an advance deposit of demanded tax, interest, or penalty and can be satisfied by filing Form DRC-03.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Section 140, Central Excise Act, 1944 Section 35F, GST Rules Rule 142, Finance Act, 1994 Section 83
M/s Army Welfare Housing Organisation v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2829075
