TaxTMI 
TaxTMI 
TaxTMI 
I. Introduction: Appeal as a Statutory Creature
The right of appeal is not inherent; it is the gift of statute. Unlike writ jurisdiction or constitutional remedies, appeals in taxation law exist only because Parliament has chosen to create them, and they come hedged with strict preconditions. The underlying principle is certainty in revenue collection.
Section 107 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) is a textbook case of this philosophy. It provides taxpayers with the right to appeal to the Appellate Authority, but at the same time restricts it with (i) a tight limitation period, (ii) narrow condonation power, and (iii) a mandatory pre-deposit requirement.
This framework is not new. It is rooted in the legislative history of Excise, Customs, and Service Tax. Yet, in recent times, the Calcutta High Court has injected nuance — holding that in marginal cases, writ jurisdiction may soften the otherwise rigid structure.
II. Legislative Scheme of Section 107
The salient features of Section 107 are:
- Time limit: Appeal to be filed within 3 months.
- Condonation: Appellate Authority may condone a further 1 month on sufficient cause.
- Thus, the outer limit = 4 months.
- Pre-deposit (Section 107(6)):
- Admitted liability: must be paid in full.
- Disputed liability: 10% of the tax in dispute, subject to a maximum of Rs. 25 crores.
- Procedural safeguards:
- No enhancement without hearing (sub-section 11).
- Written, reasoned orders (sub-section 12).
- This scheme creates a careful balance: access to appeal is allowed, but only with financial discipline and procedural safeguards.
III. Historical Antecedents: From Excise to Service Tax
1. Central Excise and Customs
Both Excise (s.35F) and Customs (s.129E) contained pre-deposit requirements, later substituted in 2014.
2. Service Tax (through Section 83 of Finance Act, 1994)
With effect from 6-8-2014, a uniform pre-deposit regime applied:
- First appeal (Commissioner Appeals/CESTAT): 7.5% of tax in dispute.
- Second stage appeal: 10% of tax in dispute.
- Maximum cap: Rs. 10 crores.
This amendment replaced the old system of stay applications and discretionary waiver, which had clogged appellate forums. By introducing a fixed percentage with a cap, the Legislature sought to ensure both fairness (cap for large demands) and efficiency (automatic stay).
IV. Continuity into GST: Higher Cap
In GST, Parliament retained this model but tightened it:
- Percentage: fixed at 10% of disputed tax.
- Cap: raised to Rs. 25 crores (Section 107(6)).
This sharp increase in cap reflects the higher stakes of GST litigation. While the Service Tax era balanced discipline with a Rs. 10-crore ceiling, the GST regime exposes large corporates to a much heavier upfront burden. For SMEs, the 10% figure itself is discouraging.
V. Supreme Court Jurisprudence on Limitation and Pre-deposit
A. Limitation
- SINGH ENTERPRISES Versus COMMISSIONER OF C. EX., JAMSHEDPUR - 2007 (12) TMI 11 - Supreme Court: No condonation beyond statutory cap (Excise).
- Commissioner of Customs & Central Excise Versus M/s Hongo India (P) Ltd. & Anr. - 2009 (3) TMI 31 - Supreme Court: Tribunal has no inherent power to condone beyond limit.
B. Pre-deposit
- Pre-deposit is mandatory; equity or hardship cannot dilute it. Courts have held that appeal without pre-deposit is not maintainable.
VI. Calcutta High Court Interventions
1. Kamala Stores & Anr. Versus The State of West Bengal & Ors. - 2025 (2) TMI 550 - CALCUTTA HIGH COURT
- Appeal filed after 79 days beyond outer limit.
- HC allowed hearing on merits, citing bona fide conduct.
- Delay of 36 days beyond statutory limit condoned.
- HC termed it “negligible delay.”
- Failure to make pre-deposit due to financial hardship.
- HC: Pre-deposit is mandatory; no waiver possible.
- GST - Appellate order holding appeal filed after delay of negligible period as time barred was not sustainable; Appellate Authority should accept memorandum of appeal and pass order on merits
4. Sudarshan Sarker Versus The Union of India & Ors. - 2025 (6) TMI 833 - CALCUTTA HIGH COURT
- Ex parte order without reasons.
- HC remanded, enforcing Section 107(12).
5. HRIDAY KUMAR DAS Versus STATE OF WEST BENGAL AND ORS - 2024 (10) TMI 40 - CALCUTTA HIGH COURT
- Appellate Authority enhanced tax suo motu without hearing.
- HC quashed order; held enhancement invalid.
VII. Principles Emerging
- Limitation: 3+1 months is final, but HC may condone marginal delays in writ jurisdiction.
- (Service Tax) to Rs. 25 crores (GST).
- Procedural fairness: Hearings and reasoned orders are essential.
- Judicial safety valve: High Courts intervene in hard cases, but relief is exceptional.
VIII. Constitutional Dimensions
Arguments have been raised that rigid limitation or heavy pre-deposit violates:
- Article 14 (equality).
- Article 19(1)(g) (freedom of trade).
- Article 300A (property).
Yet, courts have consistently held appeal is a statutory right. Only writ jurisdiction offers equity in marginal cases.
IX. Practical Consequences
- Taxpayers: Must comply with limitation and pre-deposit; only writ courts may save them in rare cases.
- Revenue: Gains certainty; but must ensure procedural fairness.
- Judiciary: Balances statute with equity; prevents injustice where delays are trivial.
X. Comparative Table: Service Tax vs. GST
Aspect | Service Tax (post-2014) | GST (2017 onwards) |
% of disputed tax (first appeal) | 7.5% | 10% |
% of disputed tax (second appeal) | 10% | 20% (10% before AA + 20% before Tribunal) |
Maximum cap | Rs. 10 crores | Rs. 25 crores |
Waiver possible? | No | No |
Automatic stay on recovery? | Yes | Yes (beyond pre-deposit) |
XI. Critical Evaluation
The rise of the pre-deposit cap from Rs. 10 crores to Rs. 25 crores has serious implications. For mega-corporates, it may still be affordable, but for medium businesses facing inflated demands, the 10% requirement itself, coupled with the high ceiling, acts as a liquidity shock.
The rigidity of limitation also creates harsh outcomes — imagine losing an appeal right for being two days late. The Calcutta High Court’s willingness to condone trivial delays is a humane corrective, but it also highlights the tension between legislative rigidity and equitable justice.
XII. Suggested Reforms
- Rationalise the Cap: Consider restoring a Rs. 10-crore cap (as in Service Tax) or at least reducing it from Rs. 25 crores to a middle figure.
- Extend Limitation: Increase condonable period from 1 month to 3 months, in line with Tribunal provisions.
- Hardship Clause: Provide limited discretion to waive or defer pre-deposit in genuine hardship cases with security.
- Portal Flexibility: Explicitly allow condonation for GSTN glitches.
XIII. Conclusion
Section 107 embodies Parliament’s intent to discipline taxpayers through limitation and pre-deposit. It carries forward the Service Tax regime but with a harsher cap. The Supreme Court’s decisions leave no scope for condonation beyond statutory limits, yet the Calcutta High Court has recently shown that writ jurisdiction can soften injustice in marginal cases.
The comparative study with Service Tax demonstrates both continuity and escalation: continuity in principle, escalation in burden (Rs. 10 crores Rs. 25 crores). Whether this escalation strikes the right balance between revenue security and taxpayer justice remains an open question for GST reform
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By G. Jayaprakash, Advocate