Mandatory Nature of Pre-deposit for Filing GST Appeals (Section 107)

Facts

The Adjudication: For the period of August and September 2022, the Petitioner-taxpayer paid the outstanding tax amount during the course of investigation/adjudication via Form DRC-03.
The Penalty: Despite the tax payment, the Adjudicating Authority imposed additional penalty and interest in the final order.
The Dispute: The Petitioner wanted to appeal the penalty but argued they should be exempt from the statutory pre-deposit because the principal tax was already paid.
The Delay: Instead of filing the appeal, the Petitioner engaged in correspondence with the GSTN (GST Network) seeking a technical waiver/permission to file without the deposit. During this time, the limitation period for filing the appeal expired.
Revenue’s Stand: The Department maintained that the GSTN has no legal authority to waive a statutory requirement mandated by the Act.

Decision

The High Court ruled in favor of the Revenue, affirming that pre-deposit is an absolute requirement:

No Exemption Power: The Court held that there is no provision in the CGST/SGST Act that allows any authority (including the GSTN or the Commissioner) to exempt a taxpayer from the mandatory pre-deposit required under Section 107(6).
Merits vs. Procedure: Whether the penalty was rightly imposed or the tax was already paid are matters to be decided on merits by the Appellate Authority. These arguments cannot be used as a justification to bypass the procedural requirement of the deposit.
Procedural Liberty: Recognizing that the Petitioner was stuck in a “correspondence trap” with the GSTN, the Court granted a two-week window to file the appeal.
Condonation of Delay: The Court directed the Appellate Authority to consider the delay condonation application “sympathetically,” provided the Petitioner paid the statutory pre-deposit.

Key Takeaways

The “Pay-to-Play” Rule: Under Section 107(6), an appeal cannot be admitted unless the appellant pays:
1. The full amount of tax, interest, and penalty admitted by them.
2. A sum equal to 10% of the remaining amount of tax in dispute (subject to a maximum cap).
DRC-03 Payments: Any tax paid during the investigation via DRC-03 is usually adjusted against the “admitted” portion. However, 10% of the disputed tax must still be specifically debited/paid as a pre-deposit to “stay” the recovery of the remaining 90%.
Avoid Technical Correspondence: Do not waste time writing to the GSTN or Helpdesk for “permission” to bypass law. The portal is a tool; the Act is the authority. If the portal doesn’t allow a filing, file a manual appeal (where permitted) or pay the deposit under protest to save the limitation period.
Automatic Stay: Once the 10% pre-deposit is paid and the appeal is filed, the recovery of the balance 90% is automatically stayed by operation of law.

HIGH COURT OF TELANGANA

Orsu Yadaiah

Goods and Services Tax Network (GSTN), New Delhi^*

APARESH KUMAR SINGH, CJ.
and G.M. MOHIUDDIN, J.

WRIT PETITION No. 3775 of 2026

FEBRUARY 10, 2026

K.P. Amarnath Reddy, learned counsel for the Petitioner. Dominic Fernandes, Senior Standing Counsel, K. Sai Akarsh, learned Assistant Government Pleader, Swaroop Oorilla, learned Special Government Pleader and Arvind Kumar Kata, learned Senior Standing Counsel for the Respondent.

ORDER

1. Sri K.P. Amarnath Reddy, learned counsel appears for petitioner.

Sri Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs appears for respondent No.1.

Sri K. Sai Akarsh, learned Assistant Government Pleader appears for Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, for respondent Nos.2 and 3.

Sri Arvind Kumar Kata, learned Senior Standing Counsel for Central Government appears for respondent No.4.

2. The petitioner claims to have paid the outstanding dues after issuance of the show cause notice during the pendency of the adjudication proceedings, but the order dated 03.09.2025 has imposed the penalty and interest amounting to Rs.15,11,348/- relatable to August and September, 2022. The petitioner had been making correspondence with the GSTN to permit it to file an appeal without pre-deposit, as the outstanding tax dues had already been paid and no case of penalty could be made out. However, in that process, time for filing the appeal expired. It is contended by the learned counsel for the petitioner that the petitioner has good grounds to explain the delay. But, the petitioner may not be compelled to make the pre-deposit of 10% against the penalty amount in the aforesaid circumstances.

3. Learned Senior Standing Counsel appearing for GSTN submits that there is no power with GSTN to exempt the pre-deposit for filing the appeal.

4. Learned Assistant Government Pleader appearing for the State Tax also submits that the pre-deposit is a prerequisite for filing the appeal. Whether the deposit of tax during the adjudication proceedings could relieve the petitioner of the liability of penalty is a matter to be decided by the appellate authority only upon the appeal being filed with pre-deposit. The petitioner, therefore, cannot claim any exemption from making the pre-deposit. Learned Assistant Government Pleader also submits that the petitioner may be allowed liberty to approach the appellate authority with an explanation for the delay within a stipulated period and take all such grounds of law and facts in its appeal.

5. In the facts and circumstances noted above, since there is no exemption for any taxpayer from making pre-deposit while filing the appeal under the GST regime, whether the liability of penalty or tax was rightly imposed or not would be the subject matter of appeal on merits, the same cannot be a ground to seek exemption from making the pre-deposit. However, since the petitioner had been in correspondence with the respondent authorities on this issue and has missed the cut off date for filing the appeal, we grant liberty to the petitioner to file an appeal within a period of two weeks with statutory deposit and a delay condonation application. The petitioner may take all such grounds of law and facts in the memo of appeal as are available to it. Needless to say, the appellate authority would consider the question of delay sympathetically taking into account the aforesaid facts and circumstances and if he is satisfied on the point of delay, he would proceed to decide the appeal on merits in accordance with law within a reasonable time, preferably, within twelve weeks from the date of receipt of a copy of this order.

6. Accordingly, the instant Writ Petition is disposed of. There shall be no order as to costs.

7. Miscellaneous applications, if any pending, shall stand closed.