Pre-deposit in cases involving only penalty – Amendment in Section 107(6) w.e.f. 1 October 2025, requiring pre-deposit, is not applicable where SCN was issued earlier

The Delhi High Court has held that requirement of 10% pre-deposit for filing appeal to the Appellate Authority in cases involving only penalty is not applicable for the cases where the SCNs have been issued before 1 October 2025, the date of coming into force of the amendment to Section 107(6) requiring 10% pre-deposit.

The Court in Gaurav Jain & Anr. v. Joint Commissioner noted the following:

• Right to carry the proceedings in appeal exists as a component of the legal proceeding before the original authority renders its decision.

• Material event is the date of SCN (25 June 2025) invoking penalty provisions under Section 122(1A).

• Submission of replies and participation in the personal hearing after 1 October 2025 does not postpone the commencement of the proceedings.

• Substituted proviso diminishes the appellate package attached to the proceedings on 25 June 2025.

• Neither Section 129 of the Finance Act, 2025 nor the substituted proviso states that the new condition shall apply to adjudicatory proceedings pending on 1 October 2025.

• Absence of any transitional provisions.

• Substitution does not by itself divest rights which had already accrued under the earlier law.

• Department’s reliance of the words ‘no appeal shall be filed’, was also rejected by relying on Supreme Court’s decision in the case of Hoosein Kasam Dada.

• Absence of an express saving clause would not aid the Department, since SC in Videocon holds that non-retrospective amendments do not affect rights and obligations crystallised at commencement of the lis, unless expressly or necessarily intended otherwise.

• Legislative intention to impair a vested appellate right cannot be inferred merely from the fact that the amendment is expressed in general terms.

• Fact that the petitioners initially sought waiver or reduction of the pre deposit does not determine the statutory regime applicable to their appeals.