When the Madhya Pradesh High Court dismissed M/s PVCON Engineering Co.’s writ petition against a GST penalty order in July 2026, the message was blunt: if Parliament has created a Tribunal to hear these disputes, a taxpayer cannot sidestep it merely because the statutory pre-deposit is inconvenient. Barely two months later, the Supreme Court stepped in. It issued notice and, in the interim, directed that the company’s appeal before the Goods and Services Tax Appellate Tribunal (GSTAT) shall be entertained without pre-deposit, subject to the outcome of the Special Leave Petition.
PVCON Engineering is a construction and site-development contractor. In December 2020, the Directorate General of GST Intelligence (DGGI) opened an investigation on the allegation that the company had passed on irregular input tax credit without actual supply of goods. Its GST registration was cancelled on 24 March 2021.
The department took years to formalise the case. A show-cause notice was issued on 26 July 2024. On 3 October 2024, the Additional Commissioner, CGST and Central Excise, Bhopal passed an Order-in-Original imposing penalty under Section 122(1)(ii) and (vii) of the CGST Act, 2017, read with Section 20 of the IGST Act, 2017, for Financial Years 2017-18 and 2018-19. There was no accompanying tax demand.
PVCON filed a first appeal under Section 107. The Appellate Authority dismissed that appeal on 21 October 2025 as time-barred. The company then approached the Madhya Pradesh High Court under Article 226, challenging the show-cause notice, the Order-in-Original and the Order-in-Appeal. Two objections ran through the case: that the new pre-deposit for a Tribunal appeal could not apply to these proceedings, and that the notice had never been issued by an officer assigned as “proper officer” for Section 122.
The law as it stood before 1 October 2025
Section 112(8) of the CGST Act governs the pre-deposit for an appeal to GSTAT. Before the 2025 amendment, it required the appellant to pay:
That formula is pegged to tax in dispute. Where the order demanded only a penalty and no tax at all, there was nothing for the 10% to attach to. A penalty-only appeal to GSTAT did not attract a percentage-based statutory pre-deposit.
What Finance Act, 2025 changed
The Finance Act, 2025 inserted a new proviso into Section 112(8) to close that gap. It reads, in substance:
Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of Section 107, has been paid by the appellant.
A corresponding change was made to Section 107(6) for first appeals. These amendments were not brought into force on the date the Finance Act received assent. Notification No. 16/2025–Central Tax dated 17 September 2025 appointed 1 October 2025 as the effective date.
Why PVCON says the proviso does not reach this case
PVCON’s show-cause notice is dated 26 July 2024. The Order-in-Original is dated 3 October 2024. Both are more than a year before the proviso came into force. Before the Supreme Court, counsel submitted that a new condition on the right of appeal cannot be applied to a lis that had already commenced unless the amendment itself says so in clear terms. Neither the Finance Act, 2025 nor Notification No. 16/2025–Central Tax says that the proviso will govern notices or orders issued before 1 October 2025.
That is the same principle the Delhi High Court applied to the sister proviso in Section 107(6) in Gaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr., W.P.(C) 8414/2026, decided on 31 July 2026 (2026 DHC 6124-DB): the right of appeal vests when the dispute begins, and in tax adjudication that beginning is the show-cause notice. GSTAT, Hyderabad has taken a similar prospective view of the Section 112(8) proviso in Reddy Veeranna Constructions Pvt. Ltd. The Supreme Court has not yet decided the point. It has only kept PVCON from being shut out of the Tribunal while the point is argued.
Under Section 2(91) of the CGST Act, a “proper officer” for any function is the Commissioner, or the officer of central tax to whom that function has been assigned by the Board. GST enforcement runs on that chain of assignment. If an officer issues a notice under a section he was never assigned, the action is open to challenge as without jurisdiction.
PVCON’s show-cause notice was issued by a DGGI officer. Circular No. 31/05/2018-GST assigns DGGI officers the power to issue show-cause notices under Sections 73 and 74 — the provisions for determination of tax not paid or short paid, with or without fraud. Section 122, the standalone penalty provision actually invoked against PVCON, is not covered by that circular.
The department’s later answer is Circular No. 254/11/2025-GST dated 27 October 2025. That circular, for the first time, assigns proper-officer functions under Section 122 (with monetary limits) to specified central tax officers. On the Board’s own recitals, no proper officer had been assigned for Section 122 before that date.
The timing is the problem. The circular arrived more than a year after the show-cause notice of 26 July 2024 and the Order-in-Original of 3 October 2024. A delegation announced in October 2025 cannot, without express words of retrospectivity, authorise what an officer did in 2024. Either the power existed on the day it was exercised, or it did not. Circular 254/11/2025-GST does not say it is retrospective.
What the Madhya Pradesh High Court held
The High Court did not decide either issue on merits. It held that:
The writ petition was dismissed, with liberty to approach GSTAT.
A Bench of Hon’ble Mr. Justice K.V. Viswanathan and Hon’ble Mr. Justice Arun Palli:
The Court decided neither the retrospectivity of the Section 112(8) proviso nor the proper-officer question. It only ensured that the pre-deposit condition does not keep PVCON out of GSTAT while those questions remain open.
On pre-deposit, the taxpayer’s date-based case is coherent: the penalty-only 10% deposit is a creature of the Finance Act, 2025, switched on only from 1 October 2025, and the show-cause notice and the Order-in-Original in this case both pre-date that cut-off. The High Court sent the argument to the Tribunal. The Supreme Court has, without deciding it, stopped the Tribunal from treating the deposit as a condition of admission.
The proper-officer question is fact-heavy: which circular applied on the date of the notice, and whether Circular 254/11/2025-GST can travel backwards. That is why both courts have left it for GSTAT on the record. If the DGGI officer had no assigned power under Section 122 on 26 July 2024, and if the later circular cannot cure that defect, the proceeding can fail on jurisdiction without the Tribunal ever reaching the fake-invoicing allegations.
Bottom line: The Supreme Court has not held that pre-deposit is inapplicable for all pre-01.10.2025 penalty-only cases. It has held, for now, that this appeal must be registered without that deposit, pending the SLP and the tagged matter. Taxpayers in the same date band should treat the order as interim protection, file the GSTAT appeal promptly, and place the Supreme Court order on the portal’s pre-deposit exemption/correction path so scrutiny does not reject the filing for want of 10% of penalty