Pre-Deposit Requirement Cannot be Retrospectively Applied to Penalty-Only Appeals.

Issue

Whether an appeal against an adjudication order imposing only interest and penalty (where tax was already paid) can be rejected for non-payment of pre-deposit, specifically when the statutory amendment mandating pre-deposit for such cases (Finance Act, 2025) was not in force at the time of filing.

Facts

The Order: An adjudication order was passed determining ‘Nil’ tax demand but imposing interest and penalty. The underlying tax liability had already been discharged by the petitioner via Form GST DRC-03.
The Appeal: The petitioner filed an appeal under Section 107 without making any pre-deposit, asserting that since there was no “tax in dispute,” the pre-deposit condition (which is typically a percentage of disputed tax) did not apply.
The Rejection: The Appellate Authority dismissed the appeal for non-compliance with the pre-deposit requirement.
The Amendment: A proviso mandating pre-deposit even for penalty-only appeals was inserted by the Finance Act, 2025, but this amendment became effective after the appeal was filed and decided.

Decision

The High Court ruled in favour of the assessee.
Substantive Right: The Court held that the right of appeal is a substantive right, and the conditions attached to it (like pre-deposit) are also substantive. Therefore, a new burden (pre-deposit on penalty) cannot be imposed retrospectively unless explicitly stated.
Pre-Amendment Position: The statute, as it stood on the date of filing, did not explicitly require a pre-deposit for appeals where only penalty or interest was in dispute and the tax was ‘Nil’.
Amendment Not Applicable: The proviso inserted by the Finance Act, 2025, was not in force at the relevant time. Consequently, the rejection of the appeal was erroneous.

Key Takeaways

Tax vs. Penalty Pre-Deposit: Prior to specific amendments, the pre-deposit under Section 107(6) was calculated on the “tax in dispute.” If the tax dispute was zero, the pre-deposit was effectively zero.
Prospective Amendments: Amendments that impose a new financial burden (like a pre-deposit on penalty) are generally prospective. They apply only to appeals filed after the date the amendment comes into force.

Appellate Authority Must Consider Condonation Application Filed Within the Extended 1-Month Window.

Issue

Whether an Appellate Authority can dismiss an appeal on the grounds of limitation for allegedly not filing a separate condonation application, when the appeal was filed within the condonable period (three months + one month) and the petitioner contends that a request for condonation was made.

Facts

Dates: The adjudication order was passed on Jan 7, 2025. The three-month limitation expired on April 7, 2025. The petitioner filed the appeal on April 26, 2025.
The Delay: The filing was late by about 19 days, which falls well within the discretionary one-month extension period allowed under Section 107(4).
The Dismissal: The Appellate Authority dismissed the appeal as time-barred, recording that no separate application for condonation of delay was filed.
Petitioner’s Stand: The petitioner demonstrated that a condonation application/request effectively existed.

Decision

The High Court remanded the matter to the Appellate Authority.
Opportunity to Condone: Without deciding on the factual controversy of whether the application was physically present, the Court directed the Appellate Authority to give the petitioner an opportunity to file an appropriate condonation application.
Discretionary Power: The Appellate Authority was directed to consider the causes shown for the short delay and, if satisfied, condone the delay and hear the appeal on its merits.

Key Takeaways

Condonable Period: Section 107(4) grants the Appellate Authority the power to condone a delay of up to one month beyond the three-month limit if “sufficient cause” is shown.
Substantial Justice: Courts generally frown upon the dismissal of statutory appeals on technical grounds (like a missing form for condonation) when the delay is short and within the condonable limit. The preference is for adjudication on merits.

HIGH COURT OF CALCUTTA

Barjinder Singh Kohli

Assistant Commissioner of Revenue^*

Om Narayan Rai, J.

WPA NO. 19676 of 2025

NOVEMBER 3, 2025

Sandip Choraria, Akash Chakraborty and Mr. Rishav Manna for the Petitioner. Mr. Tanoy Chakaborty and Mr. Saptak Sanyal for the Respondent.

ORDER

1. The petitioner is aggrieved by an order dated May 15, 2025 passed by the Appellate Authority under Section 107 of the WBGST Act, 2017 read with Section 107 of CGST Act, 2017.

2. The Appellate Authority has dismissed the petitioner’s appeal on the ground of delay and non-compliance with the condition of statutory pre-deposit.

3. The adjudication order passed under Section 74 of the said 2017 Act is dated January 7, 2025 and therefore an appeal preferred thereagainst would have been within time, if the same had been filed within April 7, 2025. The petitioner, however, lodged the appeal before the appellate authority on April 26, 2025, that is beyond the period of three months specified in Section 107(1) of the 2017 Act but within the condonable period of one month in terms of Section 107(4) of the said Act of 2017. The petitioner while preferring such appeal did not put in any pre-deposit since the order impugned before the appellate authority only determined interest and penalty payable by the petitioner. It is the petitioner’s case that as the petitioner has already paid the taxes through DRC-03 on March 12, 2021, and the adjudication order shows “Nil” tax liability/demand no pre-deposit was required to be put in. It is submitted that the marginal delay occasioned in preferring the appeal should have been condoned.

4. The Appellate Authority has however refused to condone such delay and has rejected the appeal on the twin grounds as stated hereinabove, with the following observations:

“Whereas, the appellant was asked on 07.05.2025 to show cause positively by 14.05.2025, as to why the aforesaid appeal application will not be rejected owing to the aforementioned deficiency of late filing of the appeal application under sub-section (1) & (4) of section 107 of the aforesaid Acts and also the deficiency of non-payment of the pre appeal deposits under sub-section (6) of section 107 of the aforesaid Acts; and

Whereas, the appellant has neither filed any reply to the aforesaid Show Cause Notice dated 07.05.2015 nor has he prayed for further time; and

Therefore, the instant appeal application is rejected for violation of the provisions of sub-section (1), (4) & (6) of section 107 of the foresaid Acts.”

5. Section 107(6) of the said 2017 Act as on the date when the appeal had been preferred providedas follows:

“107(6) No appeal shall be filed under sub-section (1), unless the appellant has paid –

(a) In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and

(b) A sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, [subject to a maximum of twenty-five crore rupees,] in relation to which the appeal has been filed:

[Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent of the penalty has been paid by the appellant]”

6. It is evident from the above that there was no requirement for making any pre-deposit in cases where the appeal was carried against an order pertaining only to penalty and there being no amount of tax in dispute.

7. It is well settled that right to prefer appeal is a substantive right. It is equally settled that when a statute provides for a right to prefer appeal, it can also limit or restrict such right by imposing appropriate conditions. Requirement of pre-deposit for filing appeal under Section 107(6) of the 2017 Act is one such condition. The opening words of Section 107(6) of the 2017 Act “No appeal shall be filed.” indicate that the condition of pre-deposit is attached to the filing of the appeal. It is a precondition for filing the appeal. A provision containing such condition would be in the nature of a substantive provision and not merely procedural. When there was no provision for making any pre-deposit in respect of an appeal against an order demanding penalty or interest the petitioner could not have been asked to put in any pre-deposit where the order impugned by him only involved demand of penalty and interest. Non-existent conditions affecting substantive rights of appeal cannot be imported into statute. The appellate authority has, therefore, fallen in error in rejecting the petitioner’s appeal on such ground.

8. It is noted that Section 107(6) of the 2017 Act was subsequently amended by the Finance Act, 2025 thereby inserting the following proviso mandating pre-deposit even in cases where penalty has been imposed.

“Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten percent of the said penalty has been paid by the appellant”.

The above proviso has taken effect from October 01, 2025.

9. The aforesaid provision would, however, clearly not apply to the facts of the present case inasmuch as the same was not there in the statute book at the time when the appeal was preferred. In fact, it was not there even on the date the appellate order was passed.

10. Insofar as the second ground is concerned, the Appellate Authority has recorded that the appellant has not filed separate application for condonation of delay showing sufficient cause for delay. However, the petitioner demonstrates that such application was filed and a copy thereof is appearing at pages 60 to 62 of the writ petition.

11. Be that as it may, without going into the aforesaid controversy, the matter is remanded to the Appellate Authority under Section 107, with liberty to the petitioner to file an appropriate application for condonation of delay before the said authority. The said authority shall consider such application and if the appellate authority satisfied by the causes shown for the delay occasioned, the appellate authority shall condone the delay and hear the appeal on merits. It is clarified that this Court has not expressed any opinion on the sufficiency of the causes shown for delay and the Appellate Authority shall be free to take a decision on the matter on the basis of the material before it.

12. It is clarified that if the appellate authority condones the delay upon being satisfied by the causes shown, the said authority shall proceed to hear the appeal on merits without insisting for predeposit, since the appeal had been filed on April 26, 2025 i.e. prior to the insertion of the proviso to Section 107(6) of the 2017 Act.

13. With the above observations, WPA 19676 of 2025 stands disposed of.

14. Urgent photostat certified copy of this order, if applied for, be supplied to the parties on urgent basis after completion of necessary formalities.