New 10% GST Appeal Pre-Deposit Not Applicable If SCN Issued Before October 1, 2025: Delhi High Court

The Delhi High Court has held that the amended provision requiring a 10% pre-deposit of the penalty for filing appeals against penalty-only orders under the Central Goods and Services Tax (CGST) Act cannot be applied to adjudicatory proceedings that were initiated before the amendment came into force on October 1, 2025.

The Division Bench of Justices Anil Kshetrapal and Shail Jain held that the petitioners' right to appeal vested when the show cause notice (SCN) was issued on June 25, 2025, and therefore the subsequent amendment introducing the 10% pre-deposit requirement could not be imposed on them.

"The substituted proviso does not, therefore, govern the appeals arising from the SCN dated 25.06.2025," the Court held.

Petitioners had been issued a show cause notice on June 25, 2025 proposing penalties under Section 122(1A) of the CGST Act. The adjudicating authority subsequently passed an order on December 16, 2025 imposing penalties aggregating to ₹346.55 crore on each Petitioner, without raising any tax demand against them personally.

Before October 1, 2025, Section 107(6) of the CGST Act did not require any percentage-based pre-deposit for appeals against wholly disputed penalty-only orders under Section 122(1A). However, following the substitution of the proviso with effect from October 1, 2025, appellants challenging such orders became liable to deposit 10% of the penalty before filing an appeal.

In the petitioners' case, this translated into a pre-deposit of approximately ₹34.66 crore each.

Petitioners argued that since the adjudicatory proceedings had commenced with the issuance of the SCN before the amendment came into force, their appellate rights were governed by the unamended provision.

Revenue, on the other hand, contended that the amended proviso applied because the appeal could only be filed after the order was passed in December, by which time the amendment had already taken effect.

The High Court, at the outset, reiterated that the right of appeal is a substantive right which vests upon commencement of the lis and includes the conditions governing its exercise.

Reliance was placed on the Supreme Court's decisions in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and Ors, which held that when an amended condition places a substantial restriction upon the right of Appeal, it could not govern an Appeal arising from proceedings which had commenced before the amendment.

The High Court thus held, “Appeal is substantive…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 Court held that in the present case, the lis commenced with the issuance of the show cause notice on June 25, 2025, when the Department asserted a definite claim of personal penal liability against the Petitioners.

"The replies and hearing were subsequent steps in an adjudicatory process already initiated... There is thus an unbroken continuity between the SCN, the adjudication and the appellate remedy arising from the resulting order. The lis commenced no later than 25.06.2025," it added.

Finding no indication in the Finance Act, 2025, that Parliament intended the amended proviso to operate retrospectively, the Court held that the new 10% pre-deposit requirement would not apply to adjudicatory proceedings initiated before October 1, 2025.

As such, the Court held that the Petitioners were not required to deposit 10% of the penalties as a condition for filing their statutory appeals.

For Petitioners: Advocates Ramchandra Madan, Vivek Anand Singh, Tushar Nigam and Himanshu Yadav.

For Respondents: Advocates Samiksha Godiyal, SSCCBIC with Tenzing Namgyal Bhutia and Ritiwik Narayanan