Facts of the Case

S. Ashok Kumar, Managing Director of M/s. Annai Infra Developers Limited (GSTIN 37AAHCA5B02A2Z5), challenged an Order-in-Appeal dated 26.08.2025 (No. HYD-GST-RRC-APP1-CONMR-033-25-26) passed by the Commissioner of Customs and Central Tax, Appeals-I Commissionerate, Hyderabad, which had affirmed an order-in-original imposing penalty alone upon the petitioner, without any accompanying demand of tax. During the hearing, it emerged that the GST Appellate Tribunal had, by the time of the hearing, started functioning, and had issued an order dated 24.09.2025 under Rule 123 of the GSTAT (Procedure) Rules, 2025 prescribing category-wise staggered windows for filing appeals under Section 112, tied to the date the impugned appellate order was passed.

Issues Involved

  1. Whether the petitioner should be relegated to the newly functional GST Appellate Tribunal instead of having the writ petition decided on merits.
  2. What pre-deposit is required under Section 112(8), as amended by the Finance Act, 2025, where the impugned order imposes penalty alone without any demand of tax.
  3. Whether amounts already deposited by the petitioner's firm as tax liability during investigation (in Form GST DRC-03) can be adjusted against the 10% penalty pre-deposit required for filing the Tribunal appeal.

Petitioner's Arguments

  • The petitioner submitted that since the penalty amount confirmed was substantial, it should be permitted eight weeks to make the required 10% deposit of the penalty amount as a condition for filing the appeal before the GSTAT.
  • It was further urged that any amount already deposited by the petitioner's firm towards tax liability in Form GST DRC-03 during the investigation should be permitted to be adjusted against the 10% pre-deposit of the penalty now required.

Respondent's Arguments

  • The Senior Standing Counsel for CBIC strongly opposed the adjustment plea, submitting that any amount paid under Form GST DRC-03 was towards tax liability, whereas the order-in-original as affirmed in appeal imposes penalty alone, and the petitioner could not use tax-liability payments to offset the separate 10% penalty pre-deposit condition.

Court Order / Findings

  • The Court noted that Section 130 of the Finance Act, 2025 had inserted a new proviso to Section 112(8) of the CGST Act, specifically providing that where an order demands penalty without involving any demand of tax, no appeal shall be filed unless a sum equal to 10% of the penalty (in addition to the amount payable under the proviso to Section 107(6)) has been paid.
  • Applying this newly inserted proviso, and following its own consistent practice of relegating aggrieved parties to file appeals before the now-functional GSTAT within the notified window, the Court disposed of the writ petition without expressing any opinion on the merits, granting the petitioner liberty to appeal before the Tribunal within the applicable window (commencing 01.02.2026, per the category applicable to an order dated 26.08.2025), subject to depositing 10% of the penalty amount within eight weeks.
  • The Court rejected the petitioner's contention that amounts paid towards tax liability during investigation could be adjusted against the penalty pre-deposit, holding these were distinct heads of payment; on such deposit being made, no coercive action would be taken against the petitioner till the Tribunal decides the appeal, with no order as to costs.

Important Clarification

  • The Finance Act, 2025 proviso to Section 112(8) creates a distinct pre-deposit regime for penalty-only orders: 10% of the penalty amount (plus the Section 107(6) proviso amount) must be paid before a GSTAT appeal can be filed, even though no tax demand is involved.
  • Amounts already deposited towards tax liability (e.g., via Form GST DRC-03 during investigation) cannot be adjusted against this distinct penalty pre-deposit — the two are treated as separate heads of payment under the statutory scheme.
  • Category-wise staggered GSTAT filing windows, fixed by Tribunal order under Rule 123 of the GSTAT (Procedure) Rules, 2025, are now the governing timeline for second appeals depending on when the underlying appellate order was passed.

Sections Involved

  • Section 112(8) of the Central Goods and Services Tax Act, 2017, as amended by Section 130 of the Finance Act, 2025 – introduces the specific 10%-of-penalty pre-deposit proviso for penalty-only orders, central to the ruling.
  • Section 107(6) of the CGST Act, 2017 – governs pre-deposit for the first appeal, referenced in computing the additional GSTAT pre-deposit.
  • Rule 123 of the GST Appellate Tribunal (Procedure) Rules, 2025 – the basis for the Tribunal's staggered category-wise appeal-filing windows.

Decision – In Favour of

Disposed of without opinion on merits, in effect a qualified outcome — the petitioner was relegated to the GSTAT subject to a fresh 10% penalty pre-deposit, with the adjustment plea against tax deposits rejected.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition No. 32621 of 2025
Coram: Hon'ble The Chief Justice Sri Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin
Date of Order: 29.10.2025

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