Dismissal of GST appeal for pre-deposit shortfall cured before

Dismissal of GST appeal for pre-deposit shortfall cured before appellate order is unsustainable

Issue

Whether an appeal under Section 107 of the CGST/MGST Act can be dismissed for failure to pay the statutory pre-deposit when the shortfall was fully deposited prior to the passing of the appellate order.
Whether procedural defects in making the mandatory pre-deposit are curable in consonance with principles of natural justice.

Facts

The petitioner-firm, a registered GST entity, was subjected to an investigation pursuant to summons and deposited a substantial amount during the investigation.
A Show Cause Notice (SCN) was issued alleging contraventions and proposing recovery of tax along with interest and penalty.
The petitioner filed a reply contesting the SCN, but the Joint Commissioner passed an Order-in-Original confirming the Input Tax Credit (ITC) demand and imposing penalties.
The petitioner filed a statutory appeal before the Appellate Authority under Section 107; however, there was a shortfall in the mandatory 10% statutory pre-deposit at the time of filing.
Before the Appellate Authority passed the final order, the petitioner deposited the additional amount, thereby completing the 10% statutory pre-deposit requirement.
Despite the completion of the pre-deposit prior to the order, the Commissioner (Appeals) dismissed the appeal solely on the ground of failure to pay the mandatory pre-deposit.

Decision

In favour of Assessee: The High Court held that the statutory pre-deposit and filing formalities are procedural in nature, and an opportunity to cure defects must be afforded to align with principles of natural justice.
Since the petitioner made good on the pre-deposit shortfall prior to the issuance of the appellate order, the dismissal of the appeal on procedural grounds was held to be unsustainable.
The impugned appellate order passed by the Commissioner (Appeals) was set aside, and the appeal was restored to the file to be heard afresh on merits.

Key Takeaways

Procedural Nature of Pre-Deposit: Mandatory pre-deposit requirements under Section 107 are procedural compliance safeguards designed to ensure genuine appeals, not rigid barriers intended to deny substantive hearings.
Curable Defect Prior to Order: Shortfalls in statutory pre-deposit made good before the disposal or passing of the final appellate order cure the defect, rendering subsequent summary dismissals invalid.
Natural Justice and Merits Hearing: Courts consistently prioritize deciding statutory tax disputes on their substantive merits rather than dismissing them on curable procedural lapses.

HIGH COURT OF BOMBAY

Green Woods

Union of India

Suman Shyam and Advait M. Sethna, JJ.

WRIT PETITION NO. 9483 OF 2026

JULY 27, 2026

Sujit Sahoo, Sunny Gupta, Zainab Burmawala and Ms. Reeta Sharma for the Petitioner. Karan Adik, Niyati Mankad and Ms. Priyanka Singh for the Respondent.

ORDER

1. The Writ Petitioner is a firm having registration under the Goods and Service Tax Act, 2017 bearing GSTIN 27ALVPD6556C1ZV. On 27^th December 2021, summons were issued to the Petitioner, whereafter, investigation was initiated against the Petitioner firm. During the course of investigation, the Petitioner has made deposit on four different occasions, totalling to an amount of Rs. 2,60,24,954/-. On completion of investigation, Show Cause Notice (GST DRC-01) under Section 74 read with Section 122 of the CGST Act was issued to the Petitioner by the Additional Commissioner of GST, Mumbai alleging contravention of the provisions of the Act and proposing to make recovery of tax from the Petitioner along with interest and penalty. The Petitioner had contested the Show Cause Notice by filing Reply. However, upon conclusion of the proceeding, the Joint Commissioner had passed Order-in-Original dated 26^th December 2024 confirming the demand of ITC and also imposing penalty upon the Petitioner.

2. Being aggrieved by the Order dated 26^th December 2024, the Petitioner had preferred an Appeal before the Appellate Authority. However, there was a shortfall of an amount of Rs.33,18,000/-towards statutory pre-deposit of 10%, without which, the Appeal preferred by the Petitioner could not entertained by the Appellate Authority. On 1^st April 2025, the Petitioner had deposited the additional amount of Rs. 33,18,000/- thus completing the statutory pre-deposit of 10%. Notwithstanding the same, the Appeal preferred by the Petitioner was dismissed by the Order-in-Appeal dated 4^th August 2025 passed by the learned Commissioner, CGST and CX Appeals-II, Mumbai on the ground that the Petitioner had failed to pay the statutory pre-deposit as per Section 107(6)(b) of the GST Act, 2017. Aggrieved thereby, the Petitioner has approached this Court by filing the present Writ Petition.

3. Mr Sujit Sahoo, learned counsel for the Petitioner, by referring to the statements made in the Writ Petition, submits that due to a genuine financial constraint, there was some delay on the part of the Petitioner to deposit the amount of Rs. 33,18,000/-being the shortfall of the statutory pre-deposit. However, the said amount was deposited by the Petitioner within the grace period of one month, i.e., within the period during which, the Appellate Authority had the power to condone the delay after taking note of the explanation furnished by the Petitioner. Notwithstanding the same, in a most mechanical manner and without giving adequate opportunity to the Petitioner to explain his stand, the Appeal has been dismissed, thus causing serious prejudice to the interest of Writ Petitioner. Hence, this Petition.

4. In support of his above arguments, Mr Sujit Sahoo has relied upon the following decisions:

(i)

Delphi World Money Ltd. v. Union of India 107 GST 236/92 GSTL 226 (Bombay).

(ii)

JEM Exporter v. Union of India 99 GST 127/76 GSTL 4 (Bombay).

(iii)

G. Khanna & Company v. Union of India 112 GST 319 (Bombay).

(iv)

DN Polymers v. Union of India 95 GSTL 429 (Bombay).

5. Responding to the above arguments, Mr Karan Adik, learned departmental counsel submits that the Appeal preferred by the Petitioner was liable to be dismissed since he had not made the statutory pre-deposit of 10% at the time of filing the Appeal. Mr Adik, however, has not denied or disputed the fact that the Petitioner had in fact completed the statutory pre-deposit within the grace period of one month, as provided by the statute before the impugned order dated 4^th August 2025 was passed by the Appellate Authority.

6. We have considered the submissions made at the Bar and have also gone through the material on record. In the case of JEM Exporter v. Union of India (supra), relied upon by the Petitioner, this Court was confronted with an Order-in-Appeal passed by the Appellate Authority dismissing the Appeal on two grounds, viz.,(i) that the Appellant had failed to make the statutory pre-deposit and had also failed to file certified copy of the order. Interfering with the order of the Appellate Authority, this Court had remanded the matter back to the Appellate Authority to issue a defect memo to the Petitioner pointing out the procedural defects in the Appeal so as to give the Petitioner adequate opportunity for rectifying the same. The observations made in paragraph 11 of the said decision would be relevant for the purpose of this case and, therefore, are being reproduced hereinbelow for ready reference:-

“11. The reasons given in paragraphs 5.4 to 5.6 of the order in appeal that is to say proof of pre-deposit having not been filed, certified copy of the order having not been filed and appeal having not been authenticated as per rule 26(a) is a procedural requirement for filing the appeal. In our view, justice cannot be denied for failure to comply with the procedure without giving an opportunity to the Appellant to rectify the procedural defects. In our view, the Commissioner (Appeal) ought to have issued a defect memo calling upon the Petitioner to produce the proof of pre-deposit of tax as per section 107(6) of the CGST Act, 2017, for filing the certified copy of the order and for authentication of the appeal memo as per rule 26(2)(a). The Commissioner (Appeal) having not given an opportunity to the Petitioner for curing the procedural defect was not justified in rejecting the appeal. This would be contrary to the principal of natural justice.”

7. Similar view was taken by this Court in the case of Delphi World Money Ltd. v. Union of India (supra), G. Khanna & Company v. Union of India (supra), wherein, under somewhat similar circumstances, this Court had set aside the Order-in-Appeal and restored the Appeal preferred by the Petitioner before the Commissioner of Appeal by granting reasonable time to the Appellant to rectify the defect/deficiency. Having regard to the peculiar facts and circumstances and the explanation offered by the Petitioner for failure to make pre-deposit in time, we are of the considered view that the ratio laid down in the aforementioned decisions of this Court will be applicable in the present case as well.

8. As such, in view of the ground on which the Appeal has been dismissed, i.e., failure to deposit shortfall of the pre-deposit and also taking note of the fact that such shortfall of the pre-deposit had already been made good by the Petitioner before the order dated 4^th August 2025 was passed by the Appellate Authority, we are of the view that the Appeal deserves to be heard on merit.

9. For the reasons stated above, the order dated 4^th August 2025 stands set aside. The Appeal is hereby restored to its original file.

10. The Commissioner of Appeals, i.e., the Appellate Authority to issue/serve fresh notice upon the Petitioner intimating the date of hearing of the Appeal and proceed to dispose of the Appeal on merits by a reasoned order, after giving adequate opportunity of being heard to the Petitioner.

11. With the above observations, the Writ Petition stands allowed to the extent indicated above.

12. Parties to bear their own costs.