Facts of the Case

The petitioner, M/s. Annai Infra Developers Limited, challenged an order-in-appeal dated 30.09.2025, by which the appellate authority had refused to interfere with an order-in-original imposing a penalty on the petitioner, with no accompanying demand of tax. During the hearing, it was brought to the Court's notice that the GST Appellate Tribunal had, by then, started functioning, and had issued an order dated 24.09.2025 under Rule 123 of the GST Appellate Tribunal (Procedure) Rules, 2025, prescribing a window (commencing 01.02.2026, not later than 30.06.2026) for filing appeals corresponding to orders of the kind passed in this case. The petitioner sought to avail this window but raised a dispute over the newly inserted proviso to Section 112(8), introduced by the Finance Act, 2025, requiring a 10% pre-deposit of the penalty amount for penalty-only orders.

Issues Involved

  1. Whether the petitioner, aggrieved by a penalty-only order-in-appeal, should be relegated to the newly functional GST Appellate Tribunal within the notified filing window.
  2. Whether amounts already deposited during investigation towards tax liability (in Form GST DRC-03) can be adjusted against the 10% pre-deposit of penalty required under the amended proviso to Section 112(8).

Petitioner's Arguments

  • Given the substantial amount of the penalty, the petitioner should be permitted to make the 10% pre-deposit within eight weeks.
  • Amounts already deposited by the petitioner's firm as tax liability in Form GST DRC-03 during the investigation should be permitted to be adjusted against the 10% penalty pre-deposit required for filing the appeal.

Respondent's Arguments

  • Any amount paid under Form GST DRC-03 during investigation was towards the tax liability, whereas the order-in-original (as affirmed in appeal) only imposes a penalty; the petitioner cannot claim adjustment of a tax-liability deposit against the separate 10% penalty pre-deposit.

Court Order / Findings

  • The Court noted that Section 112 of the CGST Act provides for appeal to the Appellate Tribunal, which had started functioning, with the window for filing appeals against orders of this vintage falling within serial No.5 of the Tribunal's order dated 24.09.2025 (commencing 01.02.2026, not later than 30.06.2026).
  • It noted the Finance Act, 2025 insertion of a proviso to Section 112(8), requiring that for an order demanding penalty without any tax demand, no appeal can be filed unless 10% of the penalty (in addition to any amount payable under Section 107(6) proviso) is deposited.
  • The Court disposed of the petition without expressing any opinion on the merits, granting liberty to the petitioner to file an appeal before the Appellate Tribunal within the prescribed window, on depositing 10% of the penalty amount within eight weeks, with no coercive action to be taken in the interim if the deposit is made in time.
  • The Court rejected the petitioner's contention that amounts already deposited towards tax liability during investigation could be adjusted against the separate 10% penalty pre-deposit required for the appeal.

Important Clarification

  • The Finance Act, 2025 proviso to Section 112(8) of the CGST Act mandates a distinct 10% pre-deposit of the penalty amount (over and above any Section 107(6) pre-deposit already made) specifically for appeals against orders imposing penalty without an accompanying tax demand.
  • A deposit made during investigation towards tax liability (in Form GST DRC-03) is treated as referable to the tax component and cannot be substituted for the separate statutory pre-deposit required for a penalty-only appeal.

Sections Involved

  • Section 112, CGST Act, 2017 – appeal to the Appellate Tribunal, including the amended sub-section (8) proviso (Finance Act, 2025) on pre-deposit for penalty-only orders.
  • Section 107(6), CGST Act, 2017 – pre-deposit requirement for the first appeal, cross-referenced in the amended Section 112(8) proviso.
  • GST Appellate Tribunal (Procedure) Rules, 2025, Rule 123 – classification of cases and prescribed windows for filing appeals before the Tribunal.

Decision – In Favour of

Disposed of with directions and no opinion on merits; effectively neutral, with the petitioner permitted to pursue the statutory appellate remedy on the amended pre-deposit terms.

Case Details

High Court for the State of Telangana at Hyderabad; Writ Petition No. 32622 of 2025 with IA No. 1 of 2025; Coram: Hon'ble the Chief Justice Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin; Order dated 29.10.2025.

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