GSTAT Hyderabad: No Pre-Deposit Required for Penalty-Only Appeals Filed Before 1 October 2025 Under Section 112(8) CGST Act

The Goods and Services Tax Appellate Tribunal (GSTAT), Hyderabad Bench, has ruled that appellants challenging penalty-only orders issued prior to 1 October 2025 are not required to make a statutory pre-deposit under Section 112(8) of the Central Goods and Services Tax (CGST) Act, 2017. This decision clarifies the prospective application of the Finance Act, 2025 amendment introducing the pre-deposit requirement for such appeals.

Background

The appellant, Reddy Veeranna Constructions Pvt. Ltd., was served with a show cause notice proposing penalties under Section 122 of the CGST Act, alleging the raising of fake invoices without actual supply of goods or services. The Adjudicating Authority imposed penalties under Section 122 read with Section 20 of the IGST Act and Section 125 read with Section 20 of the IGST Act. The appellant’s challenge before the First Appellate Authority was dismissed, leading to the present appeal before the GSTAT.

Core Issue Before the Tribunal

The primary question before the Tribunal was whether the appellant was required to make a statutory pre-deposit for admission of the appeal, given that the impugned order pertained solely to penalty and was issued before the effective date of the 2025 amendment to Section 112(8) of the CGST Act.

Submissions and Legal Context

The appellant’s counsel argued that all procedural defects identified by the Registry had been rectified. On the pre-deposit issue, it was submitted that the demand related only to penalty, and the impugned order was issued prior to 1 October 2025—the date from which the Finance Act, 2025 amendment to Section 112(8) became effective. The counsel relied on several judicial precedents, including the Calcutta High Court’s decision in Barjinder Singh Kohli v. Assistant Commissioner, which held that no pre-deposit was required for penalty-only appeals where the lis commenced before the amendment’s effective date. The right to appeal was argued to be a substantive right, not subject to retrospective statutory conditions unless expressly provided.

The departmental representative stated that there was no objection to the Tribunal deciding the pre-deposit issue on merits.

Tribunal’s Analysis and Findings

The Tribunal examined Section 112(8) of the CGST Act, as amended by the Finance Act, 2025, which introduced a proviso requiring a ten percent pre-deposit of the penalty amount for appeals against penalty-only orders. The Tribunal noted that this proviso was effective from 1 October 2025 and that the impugned order in the present case was issued on 12 January 2024, well before the amendment’s commencement.

Relying on the Calcutta High Court’s decision and the Supreme Court’s ruling in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh, the Tribunal held that the right to appeal is a substantive right that accrues when proceedings commence. Any subsequent amendment imposing additional conditions, such as a pre-deposit, cannot be applied retrospectively unless expressly stated. The Tribunal found no indication that the 2025 amendment was intended to have retrospective effect.

Final Ruling and Directions

The GSTAT Hyderabad Bench concluded that no pre-deposit is required for the present appeal under Section 112(8) of the CGST Act, as the impugned order was issued before the amendment’s effective date. The Tribunal clarified that this order does not prejudice the merits of the case. It further stated that if, at the time of final hearing, it is determined that a pre-deposit is required, the appellant would be bound to comply with such a direction.

The Tribunal ordered issuance of notice to the respondents and listed the matter for further hearing after four weeks.

Legal Takeaway

This decision provides clarity for appellants facing penalty-only orders under the CGST regime, confirming that the pre-deposit requirement introduced by the Finance Act, 2025 applies only prospectively. Appeals against penalty-only orders issued before 1 October 2025 can proceed without the statutory pre-deposit under Section 112(8), unless otherwise directed at the merits stage.