(2026) 1 GSTAT E- Journal 33 (Hyderabad)GST AppealsDecision: In Favour of Assessee
GSTAT on Section 112(8) Pre-Deposit: 10% Penalty Pre-Deposit Under Finance Act 2025 Operates Prospectively
The GSTAT Hyderabad Bench ruled that the proviso to Section 112(8) requiring a 10% pre-deposit of penalty in penalty-only appeals is prospective from 01.10.2025. Appeals arising from orders passed prior to that date cannot be subjected to the additional pre-deposit.
Case Name / Parties
Reddy Veeranna Constructions Pvt. Ltd v. Appeal-I Commissioner & Ors.
Appeal Number
APL/623/HYD/2026
Tribunal Bench
Hyderabad Bench
Date of Judgment / Order
28/07/2026
Coram
Hon'ble Shri Sushil Kumar Sharma, Member (Judicial) • Hon'ble Shri Duvvuri Krishna Srinivas, Member (Technical)
For Appellant: Shri Muktinutalapati Ramachandra Murthy, Counsel
For Respondent: Departmental Representative
Facts of the Case
The Appellant was served with a Show Cause Notice proposing penalties under Section 122 and Section 125 of the CGST Act read with Section 20 of the IGST Act, alleging issuance of invoices without underlying supply of goods or services. The Adjudicating Authority levied penalties under the said sections with no tax demand. The First Appellate Authority dismissed the appeal on 12.01.2024 upholding the penalty. The Appellant preferred a second appeal before the GSTAT. The GSTAT Registry issued a defect memo refusing to register the appeal on the ground that the mandatory statutory pre-deposit of 10% of the penalty amount had not been paid under the proviso to Section 112(8), which had been inserted by the Finance Act, 2025 w.e.f. 01.10.2025.
Issues Before GSTAT
- 1Whether the proviso to Section 112(8) of the CGST Act, inserted by the Finance Act, 2025 w.e.f. 01.10.2025 requiring 10% pre-deposit of penalty in penalty-only matters, applies retrospectively to appeals arising from orders passed prior to 01.10.2025.
- 2Whether an appeal involving solely penalty can be admitted by the GSTAT without insisting on a 10% pre-deposit where the underlying dispute and appellate order arose before the amendment.
Relevant Statutory Provisions & Rules
Statutory Sections
Section 107 of CGST Act, 2017Section 107(6) of CGST Act, 2017Section 112 of CGST Act, 2017Section 112(8) of CGST Act, 2017Section 122 of CGST Act, 2017Section 125 of CGST Act, 2017Section 20 of IGST Act, 2017
Contentions of the Parties
Appellant / Taxpayer Contentions
- •The right of appeal is a substantive and vested right that accrues on the date the lis commences.
- •The SCN was issued on 29.09.2022, the OIO on 28.08.2023, and the OIA on 12.01.2024 — all well before the 01.10.2025 effective date of the amended proviso.
- •Under the constitutional principle established in Hoosein Kasam Dada and the Calcutta High Court ruling in Barjinder Singh Kohli, a newly introduced onerous condition cannot impair or curtail an existing vested right of appeal unless the legislature explicitly made it retrospective.
- •All registry bookmarking and documentation defects were rectified, and the appeal should be admitted without pre-deposit.
Respondent / Revenue Contentions
- •The Departmental Representative conceded that the question was purely on the legal interpretation of pre-deposit applicability and raised no objection to deciding the matter on merits.
Findings of GSTAT
Section 112(8) originally envisaged pre-deposit computed as 10% of the remaining tax in dispute. Prior to 01.10.2025, there was no statutory requirement for pre-deposit in appeals involving only penalty and zero tax in dispute.
The proviso to Section 112(8) was brought into force by the Finance Act, 2025 specifically with prospective effect from 01.10.2025 without any retrospective intendment.
The right to appeal is not a mere matter of procedure; it is a substantive vested right. A subsequent amendment introducing a substantial additional financial burden cannot be applied to pending proceedings or past orders.
Following the binding doctrine of the Supreme Court in Hoosein Kasam Dada and the Calcutta High Court in Barjinder Singh Kohli, the amended proviso cannot be applied to an order passed on 12.01.2024.
Ratio Decidendi
Key Legal Principle
“The right of appeal is a substantive vested right. The proviso to Section 112(8) requiring a 10% pre-deposit in penalty-only matters, enacted by the Finance Act, 2025 w.e.f. 01.10.2025, is prospective in operation and cannot be imposed on appeals arising from orders passed prior to 01.10.2025.”
Final Decision & Relief Granted
Outcome: The appeal was allowed without requiring any pre-deposit under the amended proviso to Section 112(8). The Registry was directed to remove the defect and admit the appeal on file for hearing on merits.
Relief Granted: Waiver of 10% penalty pre-deposit; removal of Registry defect memo; formal admission of second appeal before GSTAT.
Operative relief was verified against the Tribunal's order and accurately summarized without altering its legal effect.
Practical Implications for Taxpayers
- Taxpayers filing GSTAT appeals against penalty-only orders passed prior to 01.10.2025 cannot be compelled by the Tribunal Registry to deposit 10% of the penalty.
- If a defect notice is issued demanding pre-deposit on pre-October 2025 orders, taxpayers should immediately cite this judgment and request an admission hearing.
- Ensure all technical registry requirements (bookmarking, verified annexures, paginated indexing) are strictly fulfilled so admission depends solely on the legal question.
Practical Takeaways for Tax Professionals
- Check the chronology: if the Order-in-Appeal or Order-in-Original was passed before 01.10.2025, advise clients that no penalty pre-deposit is payable.
- Rely on Hoosein Kasam Dada (India) Ltd. (SC) and Barjinder Singh Kohli (Cal HC) alongside this GSTAT decision when drafting replies to Registry defect memos.
- Remember that the waiver is confined to the threshold stage of admission; if the Tribunal ultimately dismisses the appeal on merits, statutory liabilities will follow.
SKM
Editorial Commentary
SKM Laws Professional Analysis
This early procedural ruling from the GSTAT Hyderabad Bench is of immense practical significance for the entire tax bar. With thousands of legacy GST dispute orders involving penalties under Sections 122, 125, and 129 now reaching the newly constituted GSTAT benches, Registries across India were reflexively demanding 10% pre-deposit under the Finance Act, 2025 amendment. The Tribunal correctly applied the classic constitutional doctrine of vested rights from Hoosein Kasam Dada to insulate older proceedings from new fiscal hurdles. Tax professionals should maintain this citation as an indispensable tool during the defect rectification stage.
Related Cases & Precedents
(2026) 1 GSTAT E-Journal 1
Affirming GSTAT's wide second appellate jurisdiction under Section 112.
Related GST Tools & Utilities
Source Citation & Forensic References:
Official Citation: (2026) 1 GSTAT E- Journal 33 (Hyderabad)
Source Publication: GSTAT E-Journal, Volume I (Till 31.08.2026), Published by Goods and Services Tax Appellate Tribunal
Journal Pages: 33-36
Legal Information Disclaimer
This case law analysis is published strictly for informational, educational, and research purposes. It does not constitute legal, tax, or professional advice. The ratio decidendi and commentary reflect professional editorial interpretations of the Goods and Services Tax Appellate Tribunal's reported judgment. Readers must refer to the full certified order of the Tribunal before initiating or defending litigation.