01Facts
The Petitioners received a Show Cause Notice dated 25.06.2025 proposing penalties under Section 122(1A) of the CGST Act, quantified at ₹346,55,18,856 against each Petitioner, without proposing any tax demand against them in their individual capacities.
¶ 2, 7At that time, Section 107(6) did not require a percentage-based pre-deposit for an appeal against a wholly disputed penalty-only order under Section 122(1A); the then-existing proviso applied only to orders under Section 129(3).
¶ 11–12The Finance Act, 2025 substituted the proviso to Section 107(6) with effect from 01.10.2025, requiring a deposit of 10% of the penalty before an appeal could be filed against an order demanding penalty without involving any tax demand.
¶ 13–15The adjudication concluded after the amendment, and an Order-in-Original dated 16.12.2025 imposed the proposed penalties on the Petitioners.
¶ 8The Petitioners sought waiver or reduction of the pre-deposit, but the Appellate Authority declined, stating that it had no power to waive or relax the statutory requirement.
¶ 9They thereafter approached the High Court, principally contending that the substituted proviso could not apply because the adjudicatory proceedings had commenced with the pre-amendment Show Cause Notice.
¶ 17–2102Issues
i.1. Whether the proviso to Section 107(6) of the CGST Act, as substituted with effect from 01.10.2025, applies to an appeal arising from adjudicatory proceedings initiated by a Show Cause Notice issued before that date, where the Order-in-Original was passed thereafter?
¶ 29–30ii.2. Whether the Appellate Authority possesses statutory or inherent power to waive or reduce the pre-deposit prescribed by the applicable version of Section 107(6)?
¶ 70–72iii.3. Whether the constitutional validity of the substituted proviso required determination in the present proceedings?
¶ 20, 7403Law Applied
The Court applied Section 107(6) of the CGST Act, under which an appeal cannot be filed unless the prescribed admitted amount and statutory pre-deposit are paid, read with Section 107(7), which provides the statutory consequence of stay upon compliance with the pre-deposit requirement.
¶ 10–16Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh, holding that a right of appeal is substantive and that a later amendment imposing a more onerous pre-deposit condition cannot impair an appellate right attached to proceedings already commenced, absent express provision or necessary intendment.
¶ 32–35Garikapati Veeraya v. N. Subbiah Choudhry establishes that the right of appeal vests when the lis commences and forms part of one continuous legal proceeding.
¶ 36Videocon International Ltd. v. SEBI characterises the appellate remedy as a package comprising the forum, scope and conditions of appeal, with the applicable package determined at commencement of the lis.
¶ 37–40The Court distinguished Hardeodas Jagannath, Surinder Singh Deswal, Chandra Sekhar Jha, and Barjinder Singh Kohli on their facts or statutory context.
¶ 58–69Tecnimont Pvt. Ltd. v. State of Punjab and M/s. Impressive Data Services Pvt. Ltd. v. Commissioner (Appeals-I) for the rule that an appellate authority cannot waive or reduce an express statutory pre-deposit requirement.
¶ 70–7104Reasoning
The Court held that the Show Cause Notice dated 25.06.2025 commenced the lis because it asserted a definite and quantified claim of personal penal liability against the Petitioners and required them to answer the allegations.
¶ 41–45Although the appeal could be filed only after the Order-in-Original was passed, the appellate right and the conditions governing its exercise attached to the proceedings when the lis commenced; the date of the subsequent order or filing of the appeal was not determinative.
¶ 31, 41–46On 25.06.2025, no percentage-based pre-deposit applied to a wholly disputed penalty-only order under Section 122(1A). The substituted proviso introduced a new and substantially onerous condition by requiring payment of 10% of the penalty before the appeal could even be filed.
¶ 46–47Neither the Finance Act, 2025 nor the substituted proviso expressly, or by necessary implication, stated that the new requirement would apply to adjudicatory proceedings pending on 01.10.2025.
¶ 48–57The words “no appeal shall be filed” prescribed the stage of compliance but did not determine the temporal applicability of the provision.
¶ 49–52The Court nevertheless agreed that the Appellate Authority had no power to waive an applicable statutory pre-deposit. Since the Court found that the substituted proviso did not apply to the Petitioners, the question of waiver did not arise.
¶ 70–73The constitutional challenge was consequently left open.
¶ 7405Holding
The High Court allowed the writ petition and held that the substituted proviso to Section 107(6), effective from 01.10.2025, did not govern the Petitioners’ appeals because the adjudicatory proceedings had commenced with the Show Cause Notice dated 25.06.2025.
¶ 75–76The appeals were therefore governed by Section 107(6) as it stood on the date of the Show Cause Notice, and the Petitioners were not required to deposit 10% of the disputed penalties.
¶ 76The Appellate Authority was directed to register and entertain the appeals, subject to compliance with Section 107(6)(a) regarding any admitted amount.
¶ 76The period from 20.03.2026, when the writ petition was filed, until the date of judgment was excluded for limitation purposes; the Petitioners were granted four weeks to file their appeals, with liberty to seek condonation of any remaining delay.
¶ 77No coercive recovery steps were to be taken for four weeks.
¶ 78The constitutional challenge and the merits of the penalties were left open.
¶ 74, 80–81Original Court PDF
Gaurav Jain & Anr.vsJoint Commissioner (Appeals-Ii) Cgst Delhi Zone & Anr.
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