Reddy Veeranna Constructions PVT. LTD vs. Appeal - I Commissioner & Ors.

Facts

The appellant, Reddy Veeranna Constructions Pvt. Ltd., filed an appeal before the Goods and Services Tax Appellate Tribunal (GSTAT) challenging an order passed by the First Appellate Authority. The original show cause notice was issued on September 29, 2022, the Order-in-Original on August 28, 2023, and the impugned Order-in-Appeal (OIA) on January 12, 2024. The dispute pertains solely to penalties imposed under Sections 122 and 125 of the CGST Act, read with Section 20 of the IGST Act, for allegedly raising fake invoices without supply of goods or services. The GSTAT's Registry pointed out a defect regarding the non-payment of statutory pre-deposit under Section 112(8) of the CGST Act.

Held

The Tribunal held that the proviso to Section 112(8) of the CGST Act, which mandates a 10% pre-deposit of penalty in cases where only penalty is demanded, has prospective application and became effective from October 1, 2025. Since the impugned order was passed on January 12, 2024, which is prior to the effective date of the amendment, the appellant is not required to make the 10% pre-deposit of the penalty. The Tribunal reasoned that the right to appeal is a substantive vested right, and amendments that impose additional conditions cannot be applied retrospectively unless expressly provided or necessarily implied. The Tribunal followed the principles laid down in Hoosein Kasam Dada (India) Ltd. (SC) and Barjinder Singh Kohli (Cal. HC), which held that non-existent statutory conditions affecting substantive rights of appeal cannot be imported into a statute. The Tribunal allowed the appeal to proceed without insisting on the pre-deposit, making it clear that this decision does not prejudice the merits of the case and that the appellant would be bound by any direction regarding pre-deposit if the Tribunal concludes otherwise during the final hearing.

Key Issues

1. Whether the pre-deposit requirement under Section 112(8) of the CGST Act, as amended by the Finance Act, 2025, is applicable to an appeal where the impugned order was passed prior to October 1, 2025, and the dispute involves only penalty. The Appellant argued that the proviso to Section 112(8), which mandates a 10% pre-deposit of penalty in penalty-only matters, became effective from October 1, 2025. Since the impugned order was issued on January 12, 2024, which is before the effective date of the amendment, the pre-deposit requirement does not apply. The Appellant contended that the right to appeal is a substantive vested right and subsequent amendments imposing additional conditions cannot be applied retrospectively without express provision or necessary implication. They relied on the Supreme Court's decision in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and the Calcutta High Court's decision in Barjinder Singh Kohli v. Assistant Commissioner of Revenue. The Revenue did not object to deciding the pre-deposit matter on merits.