10% Pre-Deposit For Penalty-Only GST Appeals Cannot Apply Retrospectively: GSTAT Hyderabad

The Hyderabad Goods and Services Tax Appellate Tribunal (GSTAT) on 28 July held that the 10% pre-deposit requirement introduced for penalty-only appeals under the proviso to Section 112(8) of the Central Goods and Services Tax (CGST) Act cannot be applied retrospectively.

A Bench comprising Judicial Member Justice Sushil Kumar Sharma and Technical Member Duvvuri Krishna Srinivas allowed the appeal filed by Reddy Veeranna Constructions Pvt. Ltd. and held that the amended provision would not apply where the show cause notice, Order-in-Original and Order-in-Appeal were issued before 1 October 2025. It observed:

“The proviso to Section 112(8) was effective from 01.10.2025 vide Finance Act, 2025 (Act No. 7 of 2025) dated 29.03.2025, wherein pre-deposit was prescribed in cases where issue involved is only the penalty. In the present case, it was observed that show cause notice was issued on 29.09.2022, Order in Original was issued on 28.08.2023 and impugned order (OIA) was issued on 12.01.2024. From this, it can be seen that the impugned order was issued very much before the amendment became effective i.e. 01.10.2025.”

The dispute arose after the appellant was issued a show cause notice alleging issuance of fake invoices without actual supply of goods or services. The authorities imposed penalties under Section 122 of the CGST Act, which provides penalties for specified offences including issuing invoices without supply, and Section 125 of the CGST Act, which provides a general penalty for contraventions where no separate penalty is prescribed.

The show cause notice was issued on 29 September 2022, followed by the Order-in-Original on 28 August 2023 and the Order-in-Appeal on 12 January 2024, which upheld the penalties. The appellant thereafter approached the GST Appellate Tribunal against the order.

At the time of filing the appeal, the Registry raised an objection that the appellant had not made the statutory pre-deposit required under the proviso to Section 112(8) of the CGST Act. The provision requires a 10% pre-deposit of the penalty amount where the appeal relates only to penalty.

The appellant contended that the proviso to Section 112(8), introduced through the Finance Act, 2025, came into effect only from 1 October 2025 and could not apply to proceedings initiated before that date. It relied upon the Supreme Court judgment in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and the Calcutta High Court judgment in Barjinder Singh Kohli v. Assistant Commissioner, which recognise the right of appeal as a vested substantive right and hold that conditions restricting such right cannot be applied retrospectively unless expressly provided by the legislature.

The Tribunal accepted the appellant's submissions and held that the Finance Act, 2025 did not provide for retrospective operation of the proviso to Section 112(8), either expressly or by necessary implication. It held that the amended pre-deposit requirement could not be applied to appeals arising from earlier proceedings.

Accordingly, the GSTAT held that the appeal could not be rejected for non-payment of the 10% pre-deposit and clarified that its order was limited to the issue of admission of the appeal. It clarified that the merits of the dispute would be considered separately at the stage of final hearing, if required.

Appearance for the Appellant: Appellant appeared in person, assisted by Mr. Muktinutalapati Ramachandra Murthy.

Appearance for the Respondents: The order does not record the name of any counsel for the respondents. It only notes that the Departmental Representative submitted that the department had no objection to the Tribunal deciding the issue of pre-deposit on merits.