TaxTMI 
TaxTMI 
2026 (8) TMI 85
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....catory proceedings were initiated before the substituted proviso came into force, though the Order-in-Original was passed thereafter. 2. The Petitioners were issued a Show Cause Notice dated 25.06.2025 (hereinafter referred to as the "SCN"), proposing the imposition of penalties under Section 122(1A) of the CGST Act. The adjudicatory proceedings culminated in the Order-in-Original dated 16.12.2025 (hereinafter referred to as the "Impugned Order"), whereby penalties aggregating to Rs.346,55,18,856/- were imposed upon each Petitioner, without any accompanying demand of tax against them in their individual capacities. 3. An Appeal against the Impugned Order lies before the Appellate Authority under Section 107 of the CGST Act. By virtue of the proviso to Section 107(6), as substituted with effect from 01.10.2025, an Appeal against an order demanding penalty without involving any demand of tax cannot be filed unless the Appellant deposits a sum equal to ten per cent of the penalty. If the substituted proviso governs the Petitioners' Appeals, each Petitioner would be required to deposit approximately Rs.34.66 crore before filing an Appeal. 4. On the date of issuance of the SCN,....
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....17. No tax demand has been raised against the Petitioners in their individual capacities. 9. Desirous of assailing the Impugned Order under Section 107 of the CGST Act, the Petitioners addressed an E-mail dated 06.03.2026 to the Appellate Authority seeking waiver or relaxation of the pre-deposit on the ground of financial hardship. By communication dated 09.03.2026, the Appellate Authority declined the request, stating that it possessed neither any statutory mandate nor any inherent discretionary power to relax, reduce or waive the prescribed pre-deposit. The present Writ Petition was thereafter instituted on 20.03.2026. STATUTORY SCHEME 10. Section 107 of the CGST Act provides the remedy of an Appeal against a decision or order passed by an Adjudicating Authority. In terms of sub-section (1), any person aggrieved by such decision or order may prefer an Appeal before the prescribed Appellate Authority within three months from the date on which the decision or order is communicated. In terms of Sub-section (4) of Section 107 of the Act, the Appellate Authority may, upon sufficient cause being shown, permit presentation of the Appeal within a further period of one month. ....
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....s' case, the statutory position has changed from the absence of any percentage-based deposit to a mandatory deposit of ten per cent of the penalty imposed upon each of them. 16. The language employed by the legislature is also material. Section 107(6) does not postpone compliance with the pre-deposit requirement until the stage of hearing or final disposal of an Appeal, it expressly declares that no Appeal shall be filed unless the prescribed payment has been made. Upon compliance with sub-section (6), recovery of the balance amount is deemed to remain stayed under sub-section (7). The pre-deposit is, therefore, attached to the institution of the Appeal itself and constitutes one of the statutory conditions upon which the appellate remedy may be exercised. SUBMISSIONS ON BEHALF OF THE PETITIONERS 17. Learned counsel for the Petitioners submits that the right of appeal is a substantive right which vests upon commencement of the lis and carries with it the conditions governing its exercise on that date. It is contended that the lis in the present case commenced with the issuance of the Show Cause Notice dated 25.06.2025, whereby the Department asserted personal penal liabili....
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....t is contended that the opening words of Section 107(6) - "No appeal shall be filed" make the date of filing of the Appeal determinative. According to the Respondents, the substituted proviso regulates the institution of appeals filed after 01.10.2025 and its application to such appeals does not amount to giving the provision retrospective operation merely because the Show Cause Notice or the transactions under adjudication preceded the amendment. 24. Learned Senior Standing Counsel further submits that the earlier proviso stood repealed and replaced upon substitution. In the absence of any saving provision preserving the earlier regime for proceedings in which only a Show Cause Notice had been issued, the substituted proviso alone governs appeals filed after 01.10.2025. 25. Emphasis is also placed upon the fact that, except for the issuance of the SCN, all subsequent steps in the adjudicatory process occurred after the substituted proviso had come into force. The Petitioners submitted their replies and participated in the personal hearing in November 2025, while the Impugned Order was passed in December 2025. It is submitted that no vested appellate right could have arisen m....
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....ate right, together with the conditions governing its exercise, vested and whether the amendment manifests an intention to apply the new condition to proceedings already initiated. ANALYSIS AND FINDINGS A. NATURE AND VESTING OF THE APPELLATE RIGHT 31. The right of Appeal is a creature of statute, and the legislature which creates the right may define its scope, prescribe the forum and impose conditions upon its exercise. Equally, however, it is firmly established that the right of Appeal is substantive and not merely procedural. Once vested, it cannot be taken away, impaired or subjected to a more onerous condition unless the legislature has manifested such an intention expressly or by necessary intendment. Although an Appeal can ordinarily be filed only after an adverse decision is rendered, the right to pursue the proceedings through the appellate hierarchy attaches to the lis at its commencement, the adverse order merely makes that right capable of exercise. 32. The principle was authoritatively applied in Hoosein Kasam Dada (supra). In that case, the assessment proceedings had commenced under a provision which required an Appellant to deposit only such amount as was....
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....idered and elaborated by the Supreme Court in Videocon International Ltd. v. Securities and Exchange Board of India (2015) 4 SCC 33. The Supreme Court explained that an appellate remedy is conferred as a particular "package". The package comprises not merely the existence of an appeal, but also the forum, scope and limitations subject to which it may be pursued. The package available at the commencement of the lis constitutes the vested substantive right of the litigant. 38. The Supreme Court drew a distinction between an amendment which enlarges an appellate package and one which diminishes it. Where the later enactment reduces the scope of the appellate remedy or makes it less advantageous, it adversely affects the vested right. In the absence of an express or necessarily implied provision to the contrary, the appellate package available at the commencement of the proceedings continues until their culmination. 39. Significantly, Videocon International (supra) holds that neither the date on which the adverse order is passed nor the date on which the Appeal is filed determines the appellate regime. The relevant date is the date on which the dispute or lis was initiated. The s....
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....etitioners to answer it, not when they formally articulated their defence. The replies and hearing were subsequent steps in an adjudicatory process already initiated. The Impugned Order thereafter imposed the very penalties proposed in the SCN. There is thus an unbroken continuity between the SCN, the adjudication and the appellate remedy arising from the resulting order. The lis commenced no later than 25.06.2025. 46. On that date, the appellate package did not include any percentage-based pre-deposit for challenging a wholly disputed penalty-only order under Section 122(1A). The substituted proviso introduced a mandatory deposit of ten per cent and prohibited filing of the Appeal unless it was first fulfilled. In relation to the Petitioners, this was a substantial financial impediment at the threshold of the appellate forum, where no corresponding percentage-based condition had previously existed. 47. The substituted proviso therefore diminishes the appellate package which attached to the proceedings on 25.06.2025. The remaining question is whether the Finance Act, 2025 nevertheless manifests an intention to apply the new condition to pending adjudicatory proceedings. C.....
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....ation to the contrary. The earlier proviso required deposit of twenty-five per cent of the penalty in appeals against orders under Section 129(3). The substituted proviso reduces that requirement to ten per cent, but simultaneously extends the deposit condition to every penalty-only order. The amendment is therefore beneficial for one category of appellants and more onerous for another. Nothing in its language indicates that the latter burden was intended to attach to adjudicatory proceedings already initiated. 54. A legislative intention to impair a vested appellate right cannot be inferred merely from the fact that the amendment is expressed in general terms. Necessary intendment requires something in the language, scheme or unavoidable operation of the enactment which is inconsistent with the continuance of the earlier right. No such inconsistency is discernible here. The substituted proviso can operate fully and effectively in respect of adjudicatory proceedings initiated on or after 01.10.2025 without being applied to proceedings in which the appellate package had already vested. 55. The reliance placed upon the automatic stay contemplated under Section 107(7) does not a....
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.... does not decide the present situation, where a formal Show Cause Notice initiating adjudication and proposing personal penalties was issued before the more onerous condition came into force. 61. The decision neither considers nor displaces the principle that an appellate right vests upon initiation of the lis. It can therefore be harmoniously read with Hoosein Kasam Dada (supra): an anterior transaction or assessment period is not decisive, but initiation of the proceedings which culminate in the Appeal is. Surinder Singh Deswal and Ors. vs. Virender Gandhi 62. In Surinder Singh Deswal (supra), the Supreme Court held that Section 148 of the Negotiable Instruments Act, 1881 could be applied to appeals arising from the Criminal complaints instituted before the provision was introduced. The Court distinguished Garikapati Veeraya (supra) and Videocon (supra) upon holding that Section 148 did not take away or affect the vested substantive right of appeal. 63. Section 148 of the N.I. Act is materially different in its operation. It empowers the Appellate Court, after an Appeal against conviction has been instituted, to direct the Appellant to deposit a minimum of twenty per ....
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....rmit such a combination of the two regimes. 68. The present case differs materially. Section 107(6) contains no comparable transitional clause. The Petitioners rely upon commencement of adjudicatory proceedings and not on the date of the alleged transactions, and the amendment creates a pre-deposit condition where none existed for this category, and the Petitioners seek application of the entire appellate regime prevailing when the lis commenced, rather than favourable features of two regimes. Barjinder Singh Kohli v. Assistant Commissioner of Revenue and Ors. 69. Barjinder Singh Kohli (supra) before the Calcutta High Court concerned an Appeal which had itself been filed before the substituted proviso came into force. It therefore did not consider a right which vested before the amendment but became exercisable thereafter. The decision does not determine the present controversy, though it recognises that a pre-deposit requirement is a substantive condition affecting the right of appeal. E. WAIVER OF PRE-DEPOSIT 70. The Respondents have relied upon Tecnimont (supra), and the decision of a Coordinate Bench of this Court in M/s. Impressive Data Services (supra). These d....