Delhi HC holds 10% pre-deposit requirement for penalty-only appeals inapplicable where SCN was issued before amendment

 This Tax Alert summarizes a recent ruling of the Delhi High Court (HC)^[1] on whether the newly introduced pre-deposit requirement for filing an appeal against penalty-only order applies where the show cause notice (SCN) was issued before 1 October 2025, while the adjudication order was passed thereafter.

The key observations of the HC are:   

• The right of appeal is a substantive right which once vested, cannot be taken away, impaired or subjected to a more onerous condition unless the legislature manifests such an intention expressly or by necessary intendment.
• This right arises when the lis (legal dispute) begins and is governed by the provisions that exist on that date.
• In tax adjudication, the dispute begins when Department issues show cause notice (SCN) asserting liability and requiring the taxpayer to respond, and not when the adjudication order is passed or the appeal is filed.
• On the date of the SCN in the present case, the Central Goods and Services Tax Act, 2017 did not provide for any pre-deposit for filing an appeal against penalty-only order under Section 122(1A).
• Since the amended proviso introduced a new and more onerous pre-deposit condition, it could not apply to proceedings already initiated before 1 October 2025 in the absence of express language or necessary implication to that effect.

Basis above, HC held that the pre-deposit requirement for filing appeals against penalty-only orders would not apply to cases where SCN was issued prior to 1 October 2025 and directed the appellate authority to entertain the appeals without insisting on payment of the same.

Comments:

• Recently, Hyderabad GSTAT [2026-VIL-45-GSTAT-HYD] held that the pre-deposit requirement under the proviso to Section 112(8), introduced from 1 October 2025 for appeals before the GSTAT against penalty-only orders, does not apply where the SCN, Order-in-Original and Order-in-Appeal were all issued before that date.
• With effect from 1 October 2025, the pre-deposit percentage and monetary limits for appeals involving disputed tax were also amended. The impact of this ruling may also need to be examined in such cases where proceedings were initiated before the amendment, but the order was passed or appeal was filed after that date.
• This ruling may have wider relevance beyond the specific issue of pre-deposit. It reinforces the principle that where a substantive right has already vested before an amendment, any subsequent amendment introducing new conditions or procedural requirements may not ordinarily apply to subsequent steps in that proceeding.