Facts of the Case:
In this case, the petitioners challenged the insistence of the GST Department on payment of a pre-deposit equivalent to 10% of the penalty amount for filing an appeal under Section 107 of the CGST Act against a penalty-only adjudication order. The dispute arose because Section 107(6) of the CGST Act was amended with effect from 01.10.2025, introducing a requirement of pre-deposit of 10% of the penalty amount in cases where the dispute relates solely to penalty.
The adjudication proceedings against the petitioners had, however, been initiated through a show cause notice dated 25.06.2025, i.e., prior to the amendment coming into force. The petitioners contended that their appellate rights crystallized on the date of initiation of proceedings and, therefore, their appeals would continue to be governed by the unamended Section 107(6), under which no pre-deposit was required in penalty-only matters. The department, on the other hand, sought to apply the amended provision on the ground that the appeal was being filed after 01.10.2025.
Issue:
Whether the amended proviso to Section 107(6) of the CGST Act, effective from 01.10.2025 and requiring a 10% pre-deposit of disputed penalty in penalty-only appeals, applies to appeals arising from adjudication proceedings initiated before the amendment came into force.
Held That:
The Delhi High Court held that the amended proviso to Section 107(6), introduced with effect from 01.10.2025, would not apply to appeals arising from adjudication proceedings that had commenced prior to that date. The Court observed that the right of appeal is a substantive and vested right which accrues on the date of initiation of proceedings and not on the date when the appeal is eventually filed.
The Court held that unless the legislature expressly provides for retrospective application, amendments imposing additional conditions on the exercise of appellate rights cannot be applied to pending or pre-existing proceedings. Since the show cause notice initiating adjudication was issued on 25.06.2025, the petitioners’ appellate rights were governed by the statutory framework existing on that date.
Accordingly, the Court ruled that the petitioners were not required to deposit 10% of the disputed penalty as a condition for maintaining their appeals. The Appellate Authority was directed to register and entertain the appeals without insisting upon such pre-deposit, subject only to compliance with Section 107(6)(a) regarding any admitted liability.
The Court further directed exclusion of the period during which the writ petition remained pending for the purpose of computing limitation for filing appeals and granted the petitioners four weeks’ time to file their appeals. The constitutional challenge to the validity of the amended provision was left open for consideration in an appropriate case.
The judgment is likely to serve as an important precedent in disputes concerning the retrospective application of amendments affecting appellate remedies under GST law.
Key takeaway: The requirement of depositing 10% of the disputed penalty under the amended proviso to Section 107(6) of the CGST Act is prospective in nature and does not apply to appeals arising from adjudication proceedings initiated before 01.10.2025.
Case Name: Gaurav Jain & Anr. Vs. Joint Commissioner (Appeals – II) CGST Delhi Zone & Anr. dated 31.07.2026
To read the complete judgement 2026 Taxo.online 2137
