The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad Bench, has held that taxpayers challenging penalty-only GST orders arising from proceedings initiated before October 1, 2025 cannot be compelled to make a 10% pre-deposit of the penalty amount as a condition for admission of their appeals.
The bench of Sushil Kumar Sharma (Judicial Member) and Duvvuri Krishna Srinivas (Technical Member) ruled that the proviso inserted to Section 112(8) of the CGST Act by the Finance Act, 2025 operates prospectively and does not apply to appeals arising out of proceedings commenced before its enforcement.
The appellant had been issued a show cause notice alleging that it had raised fake invoices without the actual supply of goods or services. Based on these allegations, the adjudicating authority imposed penalties under Section 122 of the CGST Act read with Section 20 of the IGST Act, along with penalties under Section 125 read with Section 20 of the IGST Act.
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The taxpayer challenged the adjudication order before the First Appellate Authority, which dismissed the appeal and affirmed the penalties. Aggrieved by this decision, the company approached the GST Appellate Tribunal.
At the stage of scrutiny, the Registry pointed out several procedural defects, including the alleged non-payment of the statutory pre-deposit required under Section 112(8) of the CGST Act.
The appellant submitted that all procedural deficiencies relating to indexing, bookmarking, uploading of documents and certifications had been rectified. More importantly, it argued that no pre-deposit was legally payable because the impugned proceedings related solely to penalties and had originated long before the amendment introducing a penalty-specific pre-deposit requirement came into force on October 1, 2025.
The appellant contended that the right to file an appeal is a substantive vested right that accrues when legal proceedings commence and cannot subsequently be burdened with additional statutory conditions unless the legislature expressly provides for retrospective application.
In support of this contention, reliance was placed on several judicial precedents, including the Supreme Court’s landmark decision in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh, the Calcutta High Court’s judgment in Barjinder Singh Kohli v. Assistant Commissioner, the Allahabad High Court’s decision in Anukul Bindal v. Union of India, and a decision of the Andhra Pradesh Sales Tax Appellate Tribunal.
The appellant particularly relied upon the Calcutta High Court’s ruling, which held that where an appeal relates only to penalty and there was no statutory requirement of pre-deposit when the proceedings commenced, such a condition cannot subsequently be imported through a later legislative amendment.
The Tribunal analysed Section 112(8) of the CGST Act governing pre-deposit before the GST Appellate Tribunal. It noted that prior to the Finance Act, 2025, the provision required payment of admitted dues and 10% of the disputed tax, but did not prescribe any pre-deposit where the dispute involved only penalty.
The Finance Act, 2025 inserted a proviso requiring 10% of the penalty amount to be deposited even in penalty-only cases. However, the amendment was expressly made effective only from October 1, 2025.
Examining the chronology of the present dispute, the Tribunal observed that the show cause notice was issued on September 29, 2022; the Order-in-Original was passed on August 28, 2023; and the appellate order was issued on January 12, 2024.
Since every stage of the proceedings had concluded before the amendment became effective, the Tribunal found that the newly inserted proviso could not be applied retrospectively. It further observed that the Finance Act, 2025 neither expressly nor by necessary implication provided retrospective operation to the amendment.
Relying substantially on the Calcutta High Court’s decision and the Supreme Court’s doctrine relating to vested appellate rights, the Tribunal held that no statutory pre-deposit under Section 112(8) could be insisted upon in the present appeal.
Accordingly, it directed that the appeal be admitted without requiring payment of 10% of the penalty amount and ordered issuance of notice to the respondents.
While granting relief on the issue of maintainability, the Bench made it clear that its order would not prejudice the merits of the appeal.
It observed that at the stage of final hearing, if the Tribunal ultimately concludes that the appellant was legally required to make the statutory pre-deposit under Section 112(8), it would remain bound to comply with such directions. Until then, however, the appeal would proceed without insisting on the disputed pre-deposit.
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