Justice Anil Kshetarpal, Justice Shail Jain, Delhi High Court
Mandatory 10% Pre-Deposit For GST Penalty Appeals Inapplicable To Cases Initiated Prior To Oct 2025 Amendment: Delhi High Court
|The Bench noted that proviso to Section 107(6) CGST Act cannot be applied retrospectively to impair vested appellate remedies.
The Delhi High Court has held that the mandatory 10% pre-deposit requirement for filing appeals against penalty-only orders, introduced under the substituted proviso to Section 107(6) of the Central Goods and Services Tax (CGST) Act with effect from October 1, 2025, cannot be applied retrospectively to proceedings initiated prior to the amendment.
The Court held that the right of appeal is a substantive vested right that attaches to a lis at its very commencement, which in tax adjudications corresponds to the date of issuance of the Show Cause Notice (SCN).
A Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain observed, “…the proviso to Section 107(6), as substituted with effect from 01.10.2025, does not govern the Petitioners’ Appeals arising from the adjudicatory proceedings initiated by the SCN dated 25.06.2025. Their appellate remedy is governed by Section 107(6) as it stood on that date”.
“The right of Appeal is a creature of statute…Once vested, it cannot be taken away, impaired or subjected to a more onerous condition unless the legislature has manifested such an intention expressly or by necessary intendment. Although an Appeal can ordinarily be filed only after an adverse decision is rendered, the right to pursue the proceedings through the appellate hierarchy attaches to the lis at its commencement, the adverse order merely makes that right capable of exercise”, the Bench further noted.
Advocate Ramchandra Madan appeared for the petitioner and Samiksha Godiyal, SSC appeared for the respondent.
The judgment came in writ petitions filed by taxpayers challenging pre-deposit demands aggregating to over ₹693 Crore in penalties arising from Show Cause Notices issued on June 25, 2025. The petitioners argued that requiring a 10% pre-deposit (amounting to nearly ₹34.66 Crore each) under the October 2025 amendment severely impaired their vested right of appeal, as no such pre-deposit condition existed for penalty-only orders on the date their proceedings were initiated.
Reiterating settled principles of statutory interpretation, the Court emphasized that once a right of appeal vests at the SCN stage, it cannot be taken away, impaired, or subjected to a more onerous condition by a subsequent statutory amendment unless the Legislature explicitly or by necessary implication manifests a clear intention to do so.
The Court analyzed the provisions of the Finance Act, 2025, and concluded that parliament showed no legislative intent to apply the amended proviso retrospectively to ongoing proceedings initiated under prior SCNs.
Addressing the tax department's contention that the petitioners had initially applied for a waiver or reduction of the pre-deposit and were thus precluded from challenging its statutory applicability, the Bench firmly rejected the argument of estoppel. The Court held that an erroneous assumption made by a litigant regarding the applicable legal regime cannot make a statutory provision applicable when it does not lawfully govern the proceedings, emphasizing the established legal doctrine that there can be no estoppel against a statute.
“The fact that the Petitioners initially sought waiver or reduction of the pre-deposit does not determine the statutory regime applicable to their Appeals. An erroneous assumption made by a litigant regarding the applicable law cannot render applicable a statutory provision which otherwise does not govern the proceedings. Nor can there be an estoppel against the correct interpretation of a statute. In any event, the contention concerning temporal applicability was expressly raised at the preliminary hearing, whereupon notice was issued, and the Respondents were afforded an opportunity to address the question”, the Bench noted.
The Court declared that the substituted proviso to Section 107(6) of the CGST Act does not govern appeals arising from adjudicatory proceedings initiated prior to October 1, 2025. Consequently, the appellate remedies for such taxpayers remain governed by Section 107(6) as it stood on the date the Show Cause Notice was issued, effectively relieving the petitioners from the requirement of making the mandatory 10% pre-deposit.
Cause Title: Gaurav Jain & Anr v. Joint Commissioner (Appeals-Ii) CGST Delhi Zone & Anr. (Neutral Citation: 2026:DHC:6124-DB)
Appearances:
Petitioner: Ramchandra Madan, Vivek Anand Singh, Tushar Nigam and Himanshu Yadav, Advocates.
Respondent: Samiksha Godiyal, SSC-CBIC, Tenzing Namgyal Bhutia, Ritiwik Narayanan, Advocates.