HC Allows Appeal Without 10% Penalty Pre-Deposit, Holds Amended GST Pre-Deposit Provision Cannot Apply Retrospectively:

The Delhi High Court has held that a taxpayer’s GST appeal would be governed by the pre-deposit provisions under Section 107(6) of the CGST Act as they stood when the Show Cause Notice (SCN) was issued. The Court ruled that the amended provision requiring a 10% pre-deposit of disputed penalty would not apply to proceedings initiated before October 1, 2025.

The case was filed by Krishan Pal Singh against the Additional Commissioner, Delhi West Commissionerate, challenging an Order-in-Original dated January 31, 2025, and the SCN issued on July 26, 2024. The allegations involved the creation and control of 13 firms through which Input Tax Credit (ITC) of around Rs. 30.50 crore was allegedly passed on. The adjudicating authority had passed a common order against 81 noticees.

The petitioner argued that the adjudication order was non-speaking and failed to properly address his submissions. He also relied on the Delhi High Court’s earlier judgment in Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr., concerning the applicability of the amended pre-deposit provisions.

The High Court, comprising Justice Anil Khetarpal and Justice Bharat Parashar, declined to examine the merits of the adjudication order in writ jurisdiction since the petitioner had an alternative statutory remedy of appeal under Section 107 of the CGST Act. The Court noted that the impugned order ran into more than 300 pages and contained findings regarding the petitioner’s alleged role.

However, the Court accepted the petitioner’s contention regarding the pre-deposit requirement. Since the SCN was issued on July 26, 2024, before October 1, 2025, the appeal would be governed by the provisions existing on the date of the SCN. The high court had noted that “the issue concerning pre-deposit, however, is covered by the judgment in Gaurav Jain (supra). In the present case, the Show Cause Notice was issued on 26.07.2024, i.e., prior to 01.10.2025. Further, the Impugned Order, insofar as the Petitioner is concerned, imposes penalty only without raising any demand of tax against him. Consequently, the appellate remedy available to the Petitioner would be governed by Section 107(6) of the CGST Act as it stood on the date of issuance of the Show Cause Notice.”

As the order imposed only a penalty on the petitioner without any tax demand, the Court directed that his appeal, if filed within two weeks, be considered without insisting on the 10% disputed penalty deposit under the substituted Section 107(6).