Facts of the Case

S. Ashok Kumar, Managing Director of 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 upon the petitioner. During the hearing, it emerged that the GST Appellate Tribunal (GSTAT) had, in the interim, started functioning, with the Tribunal issuing an order dated 24.09.2025 under Rule 123 of the GSTAT (Procedure) Rules, 2025, prescribing category-wise filing windows depending on the date of the underlying appellate order.

Issues Involved

  1. Whether the petitioner should be relegated to the newly functional GST Appellate Tribunal instead of the writ Court to challenge a penalty-only order-in-appeal.
  2. What pre-deposit is payable, under the Finance Act, 2025 proviso to Section 112(8), for an appeal against an order demanding penalty without any tax demand.

Petitioner's Arguments

  • Since the penalty involved was of a substantial amount, the petitioner sought to be permitted 8 weeks to make the 10% pre-deposit, and sought that amounts already deposited towards tax liability in Form GST DRC-03 during investigation be adjusted against the 10% pre-deposit of penalty.

Respondent's Arguments

  • The Senior Standing Counsel for CBIC objected to any adjustment, submitting that the amount paid under Form GST DRC-03 was towards tax liability, whereas the impugned order-in-appeal only affirmed a penalty; the petitioner could not claim the benefit of an unrelated tax deposit against the penalty pre-deposit.

Court Order / Findings

  • The Court noted the proviso inserted to Section 112(8) by the Finance Act, 2025, which requires that where an order demands penalty without any tax demand, no appeal can be filed unless 10% of the penalty is paid, in addition to any amount already payable under the proviso to Section 107(6).
  • Since the window for filing an appeal against orders dated 30.09.2025 (falling in Category 5 of the GSTAT's classification) commences only from 01.02.2026, the Court disposed of the writ petition without expressing any opinion on merits, granting the petitioner liberty to prefer an appeal before the GSTAT within the notified window.
  • The petitioner was directed to deposit 10% of the penalty amount within eight weeks, on which no coercive action shall be taken pending the GSTAT's decision.
  • The Court declined the petitioner's request to adjust the tax amount deposited during investigation (in Form GST DRC-03) against the 10% penalty pre-deposit, accepting the department's distinction between tax and penalty deposits.

Important Clarification

  • Under the Finance Act, 2025 proviso to Section 112(8) of the CGST Act, an appeal against an order demanding penalty alone (without any tax demand) requires a pre-deposit of 10% of the penalty amount, over and above any amount already paid under Section 107(6).
  • A tax amount deposited via Form GST DRC-03 during investigation cannot automatically be treated as available for adjustment against the separate 10% penalty pre-deposit required for a GSTAT appeal.

Sections Involved

  • Section 112, CGST Act, 2017 (as amended by Finance Act, 2025) — appeal to the Appellate Tribunal, including the proviso to sub-section (8) on penalty-only orders.
  • Section 107(6), CGST Act, 2017 — pre-deposit for a first appeal.

Decision – In Favour of

The writ petition was disposed of with directions, without a finding on merits, relegating the petitioner to the GSTAT subject to the statutory pre-deposit, with interim protection from coercive recovery.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition No. 32614 of 2025
Coram: Hon'ble the Chief Justice Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin
Date of Order: 29.10.2025

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