The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad Bench held that the new pre-deposit condition for penalty-only appeals could not be applied to proceedings that began before the amendment took effect. The underlying penalty dispute remains undecided.

The bench of A P Ravi (Judicial Member) and Duvvuri Krishna Srinivas (Technical Member) held that the proceedings began with a show-cause notice issued on December 24, 2021, well before the pre-deposit requirement for penalty-only appeals came into force on October 1, 2025.

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The bench has yet to decide whether the penalties were valid or whether the officers involved had jurisdiction to initiate the proceedings.

The case followed an investigation by the Directorate General of GST Intelligence (DGGI). According to the order, the department alleged that Hero Wiretex had availed input tax credit (ITC) without receiving goods and had issued invoices without making actual supplies.

The show-cause notice proposed tax demands relating to alleged wrongful ITC, along with interest and several penalties. The adjudicating authority did not pursue recovery of the alleged wrongful ITC or the tax demand concerning invoices issued without supply. It did, however, impose penalties totalling ₹30.34 crore. The first appellate authority upheld that decision in an order dated October 31, 2025.

Hero Wiretex filed its appeal before GSTAT on March 29, 2026, without a pre-deposit. The Tribunal Registry issued a defect memo over the non-payment, bringing the question of the appeal’s admission before the Bench.

A proviso to Section 112(8) of the CGST Act, effective October 1, 2025, requires a person appealing an order that demands a penalty without any tax demand to deposit 10% of the penalty, in addition to any amount payable under the corresponding proviso to Section 107(6).

The question was whether that new condition applied to Hero Wiretex’s appeal because it was filed after October 1, 2025, or whether the applicable position was determined by the earlier start of the underlying proceedings.

The company argued that imposing the new condition on proceedings begun in 2021 would impair its right of appeal. It also challenged the DGGI officers’ jurisdiction, contending that the notice and subsequent action were invalid. The department opposed waiver of the deposit, arguing that an appeal is a statutory right that must be exercised subject to the conditions in force when it is filed.

The Bench found that the relevant proceedings began when the show-cause notice was issued on December 24, 2021. At that time, Section 112(8) did not impose a pre-deposit requirement for a penalty-only appeal.

The Tribunal relied on the principle that a right of appeal is a substantive right arising when the original proceedings begin. It also referred to the Delhi High Court’s decision in Gaurav Jain v. Joint Commissioner (Appeals)-II, which considered the October 2025 amendment to the pre-deposit provision for first appeals under Section 107(6). Applying that reasoning to Section 112(8), GSTAT concluded that the later amendment could not add a new pre-deposit condition to an appeal arising from proceedings initiated before October 1, 2025.

The Bench set aside the Registry’s objection, directed it to number the appeal and place it before the Tribunal for hearing in the ordinary course.

The Tribunal expressly left the company’s jurisdictional challenge, the department’s allegations and all other issues for the final hearing. Its decision is confined to whether non-payment of the pre-deposit prevents this appeal from being admitted.

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