The Delhi High Court, in Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr., examined an important question concerning the temporal application of the amended pre-deposit requirement under Section 107(6) of the Central Goods and Services Tax Act, 2017. The judgment, pronounced on 31 July 2026, clarifies whether the ten per cent pre-deposit introduced for penalty-only orders can apply where adjudicatory proceedings began before the amendment came into force.
The petitioners had been issued a show cause notice on 25 June 2025 proposing penalties under Section 122(1A) of the CGST Act. The adjudication concluded through an order dated 16 December 2025 imposing penalties aggregating to approximately ₹346.55 crore upon each petitioner, without any corresponding demand of tax in their individual capacities.
With effect from 1 October 2025, the proviso to Section 107(6) was substituted to require a person challenging an order demanding penalty without involving any tax demand to deposit ten per cent of the penalty before filing an appeal. Applying this provision to the petitioners would have required each of them to deposit approximately ₹34.66 crore as a condition for accessing the appellate remedy.
GST
The principal issue before the High Court was whether the substituted proviso could govern an appeal arising from adjudicatory proceedings initiated before 1 October 2025, even though the final order was passed after that date.
The Court held that the right of appeal is a substantive right which forms part of the legal proceeding from the commencement of the dispute. Although an appeal can be filed only after an adverse order is passed, the appellate framework, including the conditions governing its exercise, attaches when the lis commences.
In the present case, the lis commenced when the show cause notice dated 25 June 2025 asserted a definite and quantified personal penal liability against the petitioners and required them to answer the allegations. The subsequent replies, personal hearing and adjudication were treated as continuing stages of the same proceeding.
On the date of the show cause notice, Section 107(6) did not prescribe any percentage-based pre-deposit for an appeal against a wholly disputed penalty-only order under Section 122(1A). The substituted proviso introduced such a condition for the first time and therefore imposed a materially more onerous burden upon the petitioners’ vested appellate remedy.
The Court further observed that neither the Finance Act, 2025 nor the substituted proviso expressly stated that the new condition would apply to adjudicatory proceedings already pending on 1 October 2025. There was also no necessary implication in the statutory scheme indicating that vested appellate rights were intended to be impaired.
The words “no appeal shall be filed” were held to determine the stage at which compliance becomes necessary where the amended proviso applies. Those words did not independently determine whether the amended provision governed proceedings initiated before its commencement.
Accordingly, the Court held that the petitioners’ appeals would be governed by Section 107(6) as it stood on 25 June 2025. They were therefore not required to deposit ten per cent of the disputed penalties as a condition for filing their appeals, subject to payment of any amount admitted by them under Section 107(6)(a).
The High Court also clarified that an appellate authority, being a creature of statute, has no inherent or discretionary power to waive or reduce a statutory pre-deposit where such a condition is otherwise applicable. The petitioners succeeded not on the ground of financial hardship or waiver, but because the amended provision itself was held inapplicable to their proceedings.
The constitutional challenge to the substituted proviso was left open, as it was unnecessary to decide its validity after holding that the provision did not govern the petitioners’ appeals.
The Court directed the appellate authority to register and entertain the appeals without treating non-payment of ten per cent of the disputed penalties as a deficiency. It also excluded the period from 20 March 2026 until the date of judgment while computing limitation and granted the petitioners four weeks to file their appeals. Protection from coercive recovery was continued for the same period.
Why Read This Briefing?
This judgment is significant for advocates, Chartered Accountants, Company Secretaries, GST practitioners, tax consultants, corporate tax teams and businesses dealing with amendments that alter appellate conditions. It explains when the right of appeal becomes vested, how commencement of a GST adjudication is identified and when a subsequent pre-deposit requirement may be regarded as an impermissible additional burden on pending proceedings.