GST UPDATE

Hon’ble Court: Delhi High Court
Case Title: Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr.
Petition No. & Citation: W.P.(C) 8414/2026

Hon’ble Judge(s)	JUSTICE ANIL KSHETARPAL & JUSTICE SHAIL JAIN
Date of Order	31.07.2026
Outcome	Appeal Allowed

Brief Facts of the Case

the Petitioners were issued a Show Cause Notice dated 25.06.2025 invoking Section 122(1A) of the CGST Act proposing imposition of penalties aggregating to ?346.55 crore against each petitioner. The petitioners filed detailed replies and participated in the adjudication proceedings. Subsequently, the Adjudicating Authority passed an Order-in-Original dated 16.12.2025, confirming the proposed penalties.
Aggrieved by the penalty order, the petitioners intended to file statutory appeals under Section 107 of the CGST Act. However, since the amended proviso to Section 107(6) had come into force on 01.10.2025, the Appellate Authority insisted upon a mandatory pre-deposit of 10% of the penalty, amounting to approximately ?34.66 crore for each petitioner. The petitioners approached the Delhi High Court challenging the applicability of the amended proviso.Top of Form
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Relevant Section

Section 107(6) of the Central Goods and Services Tax Act, 2017

Question before Hon’ble Court

Whether the amended pre-deposit requirement would apply where Show Cause Notice had already been issued before 01.10.2025 ?

Brief Arguments by Petitioner

Right of Appeal is a Vested Substantive Right

The Petitioners contended that the right of appeal is a substantive and vested right which accrues upon the commencement of the lis. Such right carries with it all the conditions governing its exercise as existing on the date the proceedings are initiated. Therefore, a subsequent amendment imposing a more onerous condition cannot impair an already vested appellate right. In the instant case, the lis in the present case commenced on 25.06.2025, when the Show Cause Notice was issued, hence requirement of pre deposit should not be there. Reliance was placed on various decisions.

Amended Pre-deposit Requirement Cannot Apply Retrospectively

The Petitioners argued that, on the date of issuance of the Show Cause Notice, Section 107(6) did not prescribe any percentage-based pre-deposit for filing an appeal against a penalty-only order under Section 122(1A). The subsequent substitution requiring deposit of 10% of the penalty materially burdens the appellate remedy and, therefore, cannot be applied to proceedings that had already commenced prior to 01.10.2025.

Challenge to Constitutional Validity

Without prejudice to the above submissions, the Petitioners contended that the substituted proviso to Section 107(6) is constitutionally vulnerable as it prescribes an uncapped and inflexible pre-deposit in penalty-only cases, whereas the pre-deposit in cases involving disputed tax is subject to a statutory ceiling of ?20 crore. It was argued that compelling each Petitioner to deposit approximately ?34.66 crore would render the statutory remedy of appeal illusory and inaccessible.

Brief Arguments by Respondent

Applicability of Law Existing on the Date of Filing of Appeal

It was argued that the opening words of Section 107(6), namely "No appeal shall be filed", make the date of filing of the appeal the determinative factor. Therefore, the substituted proviso governs all appeals filed on or after 01.10.2025, irrespective of the date of issuance of the Show Cause Notice or the transactions under adjudication. It was contended that the Petitioners had no enforceable right of appeal until the Order-in-Original dated 16.12.2025 was passed. Since the statutory right to file an appeal arose only after the substituted proviso to Section 107(6) had come into force, the appeal was required to comply with the law prevailing on the date of its filing.

No Vested Right on Issuance of Show Cause Notice

It was further contended that, except for the issuance of the Show Cause Notice, all subsequent stages of adjudication including filing of replies, personal hearing and passing of the Order-in-Original occurred after the substituted proviso came into force. Accordingly, no vested appellate right could arise merely upon issuance of the Show Cause Notice, particularly when no appeal had yet been filed.

Reliance on Judicial Precedents

In support of the above submissions, reliance was placed to contend that amended conditions governing the right of appeal apply prospectively to appeals filed after the amendment and to submit that statutory pre-deposit requirements are mandatory and that the Appellate Authority possesses no inherent power to waive or relax such conditions.

Findings and Judgement

A. Nature and Vesting of the Appellate Right
The Court reiterated that although the right of appeal is a statutory right, it is nevertheless a substantive and vested right. Once such right accrues, it cannot be impaired or made subject to a more onerous condition unless the legislature expressly or by necessary implication provides otherwise.
Relying upon Hoosein Kasam Dada, the Court held that a condition requiring pre-deposit is not merely procedural, as it directly affects access to the appellate forum. Referring to Garikapati Veeraya and Videocon International, the Court observed that the right of appeal carries with it the entire "appellate package", including the forum, conditions and limitations governing the appeal. This package vests on the commencement of the lis and continues throughout the litigation. Accordingly, the applicable appellate regime is determined by the date on which the proceedings commence and not by the date of the adjudication order or filing of the appeal.
B. Commencement of the Lis in the Present Case
The Court rejected the Respondents' contention that the appellate right arises only upon passing of the adjudication order. It distinguished between the vesting of the right of appeal and its exercise, observing that while an appeal becomes exercisable only after an adverse order, the governing appellate regime attaches when the lis commences.
The Court held that the Show Cause Notice dated 25.06.2025 marked thecommencement of the lis, as it asserted the Petitioners' liability and initiated formal adjudicatory proceedings. Subsequent events such as filing of replies, personal hearing and passing of the Order-in-Original were merely stages of the same proceedings. Consequently, the appellate package existing on the date of issuance of the Show Cause Notice continued to govern the Petitioners' right of appeal.
C. Whether the Amendment Discloses a Contrary Legislative Intention
After holding that the Petitioners' right of appeal had already vested, the Court examined whether the Finance Act, 2025 indicated any intention to apply the amended proviso retrospectively.
The Court noted that neither Section 129 of the Finance Act, 2025 nor the substituted proviso to Section 107(6) contains any express transitional provision stating that the amended pre-deposit requirement would apply to proceedings which had already commenced before 01.10.2025.
The Court rejected the Department's argument based on the words "No appeal shall be filed". It held that these words only specify the stage at which the pre-deposit is to be made. They do not determine which version of the law would apply to pending proceedings. Accepting the Department's interpretation would mean that the applicable law would always depend on the date of filing of the appeal, which would be contrary to the principles laid down in Hoosein Kasam Dada and Videocon International.
The Court also rejected the contention that substitution of the proviso automatically replaced the earlier provision for all pending proceedings. It observed that although substitution generally replaces the existing provision, it does not take away vested appellate rights. Therefore, the earlier provision would continue to apply to proceedings in which the lis had already commenced.
The Court further held that the absence of a saving clause does not mean that the amendment applies retrospectively. Unless the legislature clearly expresses such an intention, either expressly or by necessary implication, vested rights remain protected.
Another important aspect noticed by the Court was that the amendment had a dual effect. While it reduced the pre-deposit requirement from 25% to 10% in appeals under Section 129(3), it also introduced, for the first time, a 10% pre-deposit for penalty-only appeals. Thus, although the amendment was beneficial for one class of appellants, it imposed a new financial burden on another. In the absence of any clear legislative intent, such an onerous condition could not be applied retrospectively.
The Court also rejected the Department's reliance on Section 107(7), observing that the automatic stay of recovery is only a consequence of complying with the applicable pre-deposit requirement. It cannot determine which version of Section 107(6) governs an appeal.
Lastly, the Court held that the objective of discouraging frivolous appeals cannot be used to give retrospective effect to an amendment when the statute itself does not provide for it. A prospective amendment may naturally create different treatment for pending and future proceedings, but that by itself is not a ground to take away vested rights.
Accordingly, the Court concluded that the Finance Act, 2025 neither expressly nor by necessary implication made the newly introduced requirement of depositing 10% of the penalty applicable to proceedings that had already commenced before 01.10.2025.

D. Authorities Relied Upon by the Respondents
The Court distinguished each of the judgments relied upon by the Revenue.
It held that Hardeodas Jagannath actually supports the principle that the relevant date is the commencement of adjudicatory proceedings rather than the assessment period. Other cases relied upon were held to be inapplicable. Similarly, Chandra Sekhar Jha was distinguished on the ground that the Customs Act amendment contained an express transitional provision, unlike Section 107(6) of the CGST Act. Barjinder Singh Kohli was also held to be distinguishable since the appeal in that case had already been filed before the substituted proviso came into force.

E. Waiver of Pre-deposit
The Court agreed with the principles laid down in Tecnimont Pvt. Ltd. and Impressive Data Services Pvt. Ltd. that the Appellate Authority has no inherent power to waive a statutory pre-deposit.
However, it clarified that the present case did not concern waiver of a valid statutory requirement but the applicability of the substituted proviso itself. The Court also rejected the plea that the Petitioners were estopped from raising this contention merely because they had initially sought waiver before the Appellate Authority, observing that there can be no estoppel against the correct interpretation of a statute.
F. Constitutional Validity Challenge
Having held that the substituted proviso to Section 107(6) was itself inapplicable to the Petitioners' appeals, the Court found it unnecessary to examine the constitutional validity of the provision or the alternative prayer seeking waiver or reduction of pre-deposit under Article 226. Those issues were accordingly left open for consideration in an appropriate case.

Author’s Comment

The ruling assumes considerable importance because numerous adjudication proceedings under the GST regime were initiated before 01.10.2025 but culminated in adjudication orders after the amendment came into force. Had the Department's interpretation been accepted, taxpayers would have faced an unforeseen and substantial financial burden despite having acquired vested appellate rights under the earlier legal framework. The judgment is significant as it emphasizes that the issuance of the Show Cause Notice marks the commencement of the adjudicatory proceedings. The Court has held that the applicability of the amended pre-deposit provisions must be determined with reference to the date on which the proceedings were initiated and not the date of the adjudication order or filing of the appeal.

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Relevant Section

Question before Hon’ble Court

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