2025 (11) TMI 294 - HC - GST

Rejection of appeal for delay and pre-deposit set aside; remanded under Section 107 with liberty to seek condonation

HC set aside rejection of the appeal for delay and non-compliance with a pre-deposit condition, holding that the statutory pre-deposit provision did not ... Dismissal of petitioner’s appeal on the ground of delay and non-compliance with the condition of statutory pre-deposit - levy of penalty. HELD THAT:- It is well settled that right to prefer appeal is a substantive right. It is equally settled that when a statute provides for a right to prefer appeal, it can also limit or restrict such right by imposing appropriate conditions. Requirement of pre-deposit for filing appeal under Section 107(6) of the 2017 Act is one such condition. The opening words of Section 107(6) of the 2017 Act “No appeal shall be filed” indicate that the condition of pre-deposit is attached to the filing of the appeal. It is a precondition for filing the appeal. A provision containing such condition would be in the nature of a substantive provision and not merely procedural. When there was no provision for making any pre-deposit in respect of an appeal against an order demanding penalty or interest the petitioner could not have been asked to put in any pre-deposit where the order impugned by him only involved demand of penalty and interest. Non-existent conditions affecting substantive rights of appeal cannot be imported into statute. The appellate authority has, therefore, fallen in error in rejecting the petitioner’s appeal on such ground - Section 107(6) of the 2017 Act clearly not apply to the facts of the present case inasmuch as the same was not there in the statute book at the time when the appeal was preferred. In fact, it was not there even on the date the appellate order was passed. The matter is remanded to the Appellate Authority under Section 107, with liberty to the petitioner to file an appropriate application for condonation of delay before the said authority. The said authority shall consider such application and if the appellate authority satisfied by the causes shown for the delay occasioned, the appellate authority shall condone the delay and hear the appeal on merits. It is clarified that this Court has not expressed any opinion on the sufficiency of the causes shown for delay and the Appellate Authority shall be free to take a decision on the matter on the basis of the material before it. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether an appellate authority may reject an appeal for non-compliance with pre-deposit requirement under Section 107(6) of the 2017 Act where the impugned adjudication order only determines interest and penalty and shows nil tax demand. 2. Whether an appellate authority may reject an appeal for being filed beyond the primary limitation period without condoning the delay under Section 107(4) where the applicant seeks condonation for the short, condonable delay. 3. Whether a proviso to Section 107(6) subsequently inserted by statute (taking effect after the date of filing) can be applied retrospectively to require a pre-deposit that was not statutorily mandated at the time the appeal was filed or when the appellate order was passed. 4. Appropriate remedy and directions when an appellate authority has rejected an appeal on the twin grounds of delay and alleged non-payment of pre-deposit in the factual matrix described. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Pre-deposit requirement where the adjudication order determines only interest and penalty and shows nil tax demand Legal framework: Section 107(6) of the 2017 Act (as in force on the date of filing) conditions filing of an appeal on payment of (a) amounts admitted and (b) ten percent of the remaining tax in dispute (subject to cap). The statutory text does not, in that form, impose a pre-deposit requirement in appeals solely against orders relating to penalty or interest where no tax is in dispute. Precedent Treatment: The Court refers to the settled principle that right to prefer an appeal is a substantive right that a legislature may condition; pre-deposit requirements are substantive conditions. The decision applies that principle to construe the statutory precondition strictly rather than expand it beyond its text. No contrary authority is cited; the Court follows established statutory interpretation principles. Interpretation and reasoning: The Court reasons that the opening words 'No appeal shall be filed ...' indicate a precondition to the filing of the appeal and that such a substantive condition must be grounded in the statutory text. Where an adjudication order shows 'Nil' tax liability and only imposes penalty/interest, there is no statutory basis in the Section 107(6) text (as then written) to demand any pre-deposit. Importing a non-existent pre-deposit requirement into the statutory scheme would unlawfully alter the substantive right granted by the statute. Ratio vs. Obiter: Ratio - the pre-deposit requirement in Section 107(6) cannot be applied where the impugned order only determines penalty/interest and records nil tax demand, because the statutory text then in force did not mandate such pre-deposit. Obiter - general observations on the nature of pre-deposit provisions as conditions on substantive appellate rights, insofar as they reiterate settled principles, are explanatory but support the ratio. Conclusion: The appellate authority erred in rejecting the appeal solely on the ground of non-payment of pre-deposit where the adjudication order only determined penalty and interest and recorded nil tax demand, because no pre-deposit was then legally required. Issue 2 - Condonation of delay under Section 107(4) for short/condonable delay and the effect of alleged non-filing of condonation application Legal framework: Section 107(1) prescribes the primary three-month limitation for filing an appeal; Section 107(4) allows condonation of delay up to one month beyond that period upon showing sufficient cause. The appellate authority has the statutory power to consider and condone delay on sufficient cause being shown. Precedent Treatment: The Court reiterates the settled law that right to prefer an appeal is substantive but may be limited by statutory time-limits and that condonation mechanisms provided by statute must be applied on the material presented. No specific precedents are cited; the Court adheres to established administrative law principles regarding condonation and sufficiency of cause. Interpretation and reasoning: The appellate authority recorded absence of a separate condonation application and relied on that to reject the appeal for delay. The petitioner, however, demonstrates that a condonation application was filed (recorded in the writ petition). The Court does not resolve the factual dispute about whether the application was actually before the appellate authority but observes that, irrespective of that controversy, the appropriate course is remand so the authority can consider any condonation application and exercise its discretion on sufficiency of cause based on material before it. Ratio vs. Obiter: Ratio - where an appeal is filed within the statutory condonable period, the appellate authority must consider any condonation application and may condone delay if satisfied by the causes shown; summary rejection without considering such application (or without proper notice and opportunity) is impermissible. Obiter - the Court expressly refrains from opining on the sufficiency of the causes shown for delay, leaving that to the appellate authority. Conclusion: The appellate authority should be directed to entertain and decide any condonation application on its merits; the matter is remanded for that purpose and, if delay is condoned, the appeal must be heard on merits. Issue 3 - Non-application of subsequently inserted proviso to Section 107(6) to appeals filed before its effective date Legal framework: The proviso to Section 107(6) (as inserted by an amending Finance Act) mandates a ten percent pre-deposit of penalty where penalty alone is ordered; that proviso has an effective date subsequent to the filing of the appeal and to the appellate order. Precedent Treatment: The Court applies the fundamental temporal principle that statutory amendments do not ordinarily apply to acts completed before their effective date, unless Parliament clearly intends retroactivity. No case law is cited; the Court follows this standard principle of statutory construction and of non-retroactivity of criminal/procedural/substantive impositions absent express provision. Interpretation and reasoning: Because the proviso was not in force when the appeal was filed (April 26, 2025) nor when the appellate order was passed, it cannot be applied to require a pre-deposit in respect of that appeal. The Court therefore holds that even if the appellate authority were tempted to insist on a pre-deposit pursuant to the later proviso, it would be acting beyond the statute as it then stood. Ratio vs. Obiter: Ratio - statutory amendments taking effect after the filing of an appeal cannot be invoked to impose new pre-deposit requirements on appeals already filed; therefore no pre-deposit may be insisted upon in the present matter. Obiter - none beyond the core principle outlined. Conclusion: The subsequently inserted proviso to Section 107(6) is inapplicable to the appeal under challenge because it was not part of the statute when the appeal was filed or when the appellate order was passed; pre-deposit cannot be demanded on that basis. Issue 4 - Appropriate remedy where appellate authority rejected appeal on grounds of delay and non-payment of pre-deposit Legal framework: Courts have supervisory jurisdiction to remedy errors of law and to ensure statutory procedures are followed; when an appellate authority has failed to consider statutory conditions or has applied inapplicable statutory provisions, the remedy may be remand with directions to decide afresh in accordance with law. Precedent Treatment: The Court follows accepted remedial practice of remand where fact-sensitive discretionary determinations (such as condonation of delay) have not been properly considered or where a statutory misapplication has occurred. No separate authority is cited. Interpretation and reasoning: Given (a) the absence of statutory requirement for pre-deposit in appeals confined to penalty/interest at the time of filing, (b) the filing within the condonable period under Section 107(4) (albeit beyond primary three months), and (c) dispute whether a condonation application was on record, the Court remands the matter to the appellate authority with liberty to the petitioner to file/renew a condonation application. The appellate authority is directed to consider the cause(s) for delay and, if satisfied, condone delay and hear the appeal on merits without insisting on pre-deposit (because the later proviso was not in force when the appeal was filed). Ratio vs. Obiter: Ratio - where an appeal filed before insertion of a statutory proviso is rejected for non-payment of a pre-deposit that was not then required, the appellate authority must reconsider; if delay is condoned it must proceed to hear the appeal on merits without imposing the subsequently-inserted pre-deposit requirement. Obiter - the Court expressly does not evaluate the sufficiency of the causes for delay, leaving that factual/directional determination to the appellate authority. Conclusion: Mandated remedial course is remand to the appellate authority to consider any condonation application and, if delay is condoned, to hear the appeal on merits without insisting on a pre-deposit that was not required at the time of filing; the Court refrains from deciding sufficiency of the grounds for delay.