Pre-Deposit for Appeal under GST not applicable retroactively: Delhi High Court

In a major relief to taxpayers, the Delhi High Court has ruled against retroactive application of pre-deposit for appeal under GST in case of penalty. The Court has clarified that the amended 10% pre-deposit requirement for filing appeals against penalty-only orders under GST cannot be applied retroactively to proceedings initiated prior to the amendment.  

A Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain addressed a writ petition challenging the retrospective application of the substituted proviso to Section 107(6) of the Central Goods and Services Tax Act, 2017. The petitioners faced penalty proceedings initiated via a Show Cause Notice dated June 25, 2025, culminating in an order imposing penalties exceeding ₹346 crore on each petitioner without any demand for tax. The Delhi High Court in the instant case affirmed that the laws applicable at the time of issuing a show cause notice governs subsequent statutory appeal conditions. 

Vested Right of Appeal and Scope of Amendment 

The Delhi High Court clarified that the right of appeal is a substantive right that vests upon the commencement of original proceedings. Analyzing the nature of the amendment introduced via the Finance Act, 2023 with effect from October 1, 2025, the Bench observed that imposing a mandatory 10% pre-deposit on penalty-only appeals created an onerous burden where no such percentage-based condition previously existed. 

The High Court, in its reasoning, observed: "The right of Appeal is a creature of statute, and the legislature which creates the right may define its scope, prescribe the forum and impose conditions upon its exercise. Equally, however, it is firmly established that the right of Appeal is substantive and not merely procedural. 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." 

Pre-Deposit for Appeal under GST in Case of Penalty 

Addressing the statutory mechanics and precedent, the Court held that the phrase "no appeal shall be filed" merely prescribes the stage of compliance rather than intending a retrospective application to pending litigations. Reaffirming foundational principles, the Court relied on landmark rulings including Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and Ors. ( "1953 SCC OnLine SC 33": 1953 CaseBase(SC) 120), Garikapati Veeraya v. N. Subbiah Choudhry and Ors. ( "(1957) 1 SCC 180": 1957 CaseBase(SC) 77), and Videocon International Ltd. v. Securities and Exchange Board of India ( "(2015) 4 SCC 33": 2015 CaseBase(SC) 941) to establish that amendments diminishing appellate rights do not apply retroactively without express legislative intent. 

While distinguishing decisions such as Surinder Singh Deswal and Ors. v. Virender Gandhi ( "(2019) 11 SCC 341": 2019 CaseBase(SC) 3720) and Chandra Sekhar Jha v. Union of India and Anr. ( "(2022) 14 SCC 152": 2022 CaseBase(SC) 549), the Court affirmed the rationale in Armour Security (India) Ltd. v. Commissioner, CGST Delhi East and Anr. regarding the commencement of formal adjudicatory proceedings. Further, referencing decisions like Tecnimont Private Limited v. State of Punjab and Ors. and M/s. Impressive Data Services Private Limited v. Commissioner (Appeals-I), Central Tax, GST Delhi ( "2025:DHC:2651-DB": 2025 CaseBase(DEL) 1316), the Court reiterated that while statutory appellate authorities lack inherent power to waive mandatory pre-deposits, the amended condition itself was inapplicable to the petitioners. 

Court’s Directions on Retroactive Application 

The Delhi High Court issued the directions on retroactive application of pre-deposit for appeal under GST in case of penalty. It stated that "the Petitioners are not required to deposit ten per cent of the penalties imposed under the Impugned Order as a condition for filing their appeals. This shall, however, remain subject to compliance with Section 107(6)(a) in respect of any amount admitted by either of the Petitioners. The Appellate Authority shall register and entertain the appeals without treating the non-payment of ten per cent of the disputed penalties as a deficiency. The present Writ Petition was instituted on 20.03.2026 while the question concerning the applicable pre-deposit regime remained under consideration. Accordingly, for the purpose of computing limitation under Section 107 of the CGST Act, the period from 20.03.2026 until the date of this judgment shall stand excluded. The Petitioners shall file their respective Appeals within four weeks from today. If any delay remains after such exclusion, the Petitioners may seek condonation under Section 107(4), which shall be considered by the Appellate Authority in accordance with law. No coercive steps for recovery of the penalties imposed upon the Petitioners shall be taken for a period of four weeks from today. If the Appeals are filed within the aforesaid period, the statutory consequence contemplated under Section 107(7) shall only follow subject to compliance with the applicable requirements of Section 107(6)." 

Background of Pre-Deposit for Appeal under GST 

The petitioners were issued a Show Cause Notice on June 25, 2025, under Section 122(1A) of the Central Goods and Services Tax Act, 2017 proposing severe penalties alleging fraudulent availment and passing of Input Tax Credit. The adjudicatory process concluded on December 16, 2025, imposing penalties amounting to ₹346,55,18,856/- on each petitioner. 

During the interim, effective October 1, 2025, the Finance Act, 2023 substituted the proviso to Section 107(6) of the Central Goods and Services Tax Act, 2017, mandating a 10% pre-deposit of the penalty for filing an appeal in penalty-only orders. Seeking access to the appellate forum without depositing roughly ₹34.66 crore each, the petitioners approached the High Court under Article 226 of the Constitution of India, 1950. They challenged the retroactive application of pre-deposit for appeal under GST in case of penalty. The High Court allowed the writ petition, holding that the amendment did not govern the petitioners' appeals and leaving the constitutional challenge open. 

Case Details: 

Case No.: W.P.(C) 8414/2026 

Case Title: GAURAV JAIN & ANR. v. JOINT COMMISSIONER (APPEALS-II) CGST DELHI ZONE & ANR. 

Appearances: 

For the Petitioner(s): Mr. Ramchandra Madan, Mr. Vivek Anand Singh, Mr. Tushar Nigam and Mr. Himanshu Yadav, Advs. 

For the Respondent(s): Ms. Samiksha Godiyal, SSC-CBIC with Mr. Tenzing Namgyal Bhutia and Mr. Ritiwik Narayanan, Advs. 

Source: 2026 CaseBase(DEL) 3711