GST WEEKLY UPDATE :2/2026-27 (12.04.2026) By CA Vipul Khandhar

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1.    Difficulty in Filing Appeals on GST Portal in NIL Demand Cases: A Procedural Gap Affecting Substantive Rights:

1. Introduction

A significant procedural issue has emerged on the GST portal, impacting taxpayers’ ability to exercise their statutory right of appeal. The problem arises in situations where adjudication orders reflect a “NIL” demand, despite the existence of a dispute regarding tax liability.

This anomaly has been formally acknowledged by the Goods and Services Tax Network (GSTN), which has noted that taxpayers are encountering technical barriers while attempting to file appeals under Central Goods and Services Tax Act, 2017.

The issue is not merely technical—it strikes at the core of natural justice and appellate rights, raising concerns about whether procedural design can override substantive legal entitlements.

2. Background: When Does the Issue Arise?

The problem typically arises in the following fact pattern:

• A Show Cause Notice (SCN) is issued proposing tax demand.
• The taxpayer makes voluntary payment (tax/interest/penalty), often:
  • To mitigate litigation exposure, or
  • To avoid coercive recovery measures,
  • Without admitting liability.
• The adjudicating authority subsequently:
  • Passes an order,
  • Treats the payment as full discharge,
  • Fails to quantify or determine liability, and
  • Reflects the demand as “NIL”.

This creates a paradox: There is a dispute in law, but no demand in the system.

3. System Behaviour on GST Portal

Under the GST framework:

• Every adjudication order results in generation of a Demand ID in the Demand and Collection Register (DCR) (liability ledger).
• Where the order reflects NIL demand, the portal records zero liability.

Consequence: When the taxpayer attempts to file appeal (Form GST APL-01):

• The portal throws an error:

“Disputed amount cannot be more than demand amount itself.”

• Since:
  • Demand = 0
  • Dispute > 0

➡️ The system blocks the appeal filing entirely.

4. Legal Position: Right to Appeal Cannot Be Denied

(a) Statutory Right: Under Section 107 of the CGST Act, 2017:

• Every person aggrieved by an adjudication order has a statutory right to appeal.

This right is:

• Independent of payment, and
• Not conditional upon outstanding demand.

(b) Payment Does Not Mean Admission: It is a settled principle that:

• Payment during SCN stage ≠ Admission of liability

Courts have consistently held:

• Voluntary or protective payments do not extinguish the right to contest.
• Adjudication must involve determination of liability, not mere appropriation of payment.

(c) Violation of Natural Justice: Failure to determine liability results in:

• Absence of a speaking order
• Denial of reasoned adjudication
• Frustration of appellate remedy

Thus, the NIL demand structure:➡️ Converts a disputed case into a non-appealable case,
➡️ Which is legally untenable.

5. GSTN Clarification and Administrative View: The Goods and Services Tax Network has clarified:

• Taxpayers retain the right to appeal, even if:
  • Payment was made earlier, and
  • Liability is disputed.

However: The portal architecture does not permit appeal filing in NIL demand scenarios.

This reflects a disconnect between law and system design.

6. Practical Difficulty Faced by Taxpayers

Issue	Impact
NIL demand in order	No liability recorded
Portal validation logic	Blocks appeal filing
No appellate access	Legal remedy denied
Time limitation continues	Risk of limitation expiry

This creates a serious compliance risk, especially where:

• Limitation period under Section 107 is running, and
• Rectification is delayed.

7. Suggested Alternate Remedy (As per GSTN): GSTN has recommended the following approach:

Step 1: Seek Rectification: File rectification application before adjudicating authority:

• • Through GST portal (where available)
  • Or manual representation (if required)

Step 2: Request Proper Determination: Seek:

• • Explicit determination of liability
  • Correct reflection of demand amount

Step 3: Obtain Rectification Order: Authority issues revised order with:

• • Demand quantified

Step 4: File Appeal: Once demand reflects in DCR:

• • File appeal in Form GST APL-01

8. Critical Analysis: Is Rectification the Right Solution?: While administratively convenient, this solution raises concerns:

(a) Rectification vs Review

• Rectification is meant for:
  • Apparent errors
• Not for:
  • Substantive re-determination of liability

Thus, directing taxpayers to rectification:➡️ May stretch statutory boundaries

(b) Limitation Risk

• Appeal limitation continues to run
• Delay in rectification may:

➡️ Render appeal time-barred

(c) System vs Law Conflict

• Law permits appeal
• System blocks it

➡️ Technology cannot override statute

9. Suggested Way Forward

(1) System-Level Fix

GSTN should: Allow appeal filing even where:

• • Demand = NIL
  • Dispute exists

OR

• • Introduce: “Notional demand” field for appeal purposes

(2) Administrative Instruction: Tax authorities should: Mandate adjudicating officers to:

• • Always quantify liability, even if paid

(3) Judicial Intervention (If Required): Taxpayers may consider:

• Filing writ petition before High Courts:
  • Challenging denial of appeal mechanism
  • Seeking direction to enable filing

10. Conclusion: The issue of inability to file appeals in NIL demand cases highlights a deeper structural concern in GST administration:

Procedural architecture must facilitate—not frustrate—substantive rights.

While GSTN has acknowledged the difficulty and suggested rectification as a workaround, a more robust and legally aligned solution is required.

Until systemic changes are implemented, taxpayers must:

• Act swiftly,
• Seek rectification proactively, and
• Safeguard limitation timelines.

2. Pre-deposit Percentage in the GST Portal: A Welcome Shift Towards Procedural Flexibility:

Introduction

In a significant procedural enhancement, the Goods and Services Tax Network (GSTN) has introduced flexibility in the pre-deposit field while filing appeals in Form GST APL-01 on the GST portal.

Effective April 6, 2026, taxpayers can now edit the pre-deposit percentage, addressing long-standing practical challenges faced under the earlier system-driven rigidity.

This change aligns the portal functionality more closely with the legal framework prescribed under the Central Goods and Services Tax Act, 2017 and marks a progressive step towards improving taxpayer experience.

2. Legal Framework: Pre-deposit under GST

Section 107(6) of the CGST Act, 2017:As per statutory provisions:

• Filing of appeal before the Appellate Authority requires:
  • Full payment of:
    • Admitted tax liability, and
  • Pre-deposit of 10% of the disputed tax amount

Subject to: A maximum cap of ₹25 crore

This pre-deposit is a condition precedent for admission of appeal and serves as a safeguard against frivolous litigation.

3. Earlier System Constraint: Prior to this update:

• The GST portal:
  • Auto-populated pre-deposit at 10%
  • Did not allow editing
• This created issues where:

(a) Pre-deposit Already Made: Taxpayer had:

• • Paid 10% (or more) via:
    • DRC-03
    • Earlier proceedings
• Portal still demanded:
  • Fresh 10% payment

(b) Incorrect Demand Classification

• • Demand reflected under: Wrong tax head (IGST/CGST/SGST)
  • Result: Incorrect pre-deposit computation

(c) Partial Dispute Cases: Only part of demand was disputed

• • However: Portal calculated 10% on entire demand

(d) Multiple Proceedings Adjustment Issues: Adjustments across:

• • SCN stage payments
  • Recovery proceedings

➡️ Resulted in duplication or excess payment

4. GSTN’s System Enhancement (Effective April 6, 2026)

Recognizing these challenges, the Goods and Services Tax Network has implemented the following key change:✔ Editable Pre-deposit Field

• Taxpayers can now:
  • Modify the pre-deposit percentage/value
  • Based on:
    • Actual liability
    • Payments already made
    • Nature of dispute

5. Practical Implications

(a) Greater Accuracy in Compliance: Taxpayers can: Align pre-deposit with actual disputed amount: Avoid overpayment

(b) Recognition of Prior Payments: Payments made via:

• • DRC-03
  • Investigation stage
  • SCN stage

Can now be:➡️ Adjusted while filing appeal

(c) Flexibility in Complex Cases: Particularly beneficial in:

• Multi-head disputes
• Partial appeals
• Legacy cases with system mismatches

(d) Reduced Litigation on Technical Grounds: Earlier: Appeals rejected due to: Incorrect pre-deposit : Now:➡️ Reduced procedural disputes

6. Safeguard: Role of Appellate Authority: While flexibility is granted:

• The Appellate Authority retains power to:
  • Verify:
    • Correctness of pre-deposit
    • Mode of payment
  • Ensure:
    • Compliance with Section 107(6)

Implication: Incorrect or short payment may still:

• • Lead to defect memo
  • Or dismissal of appeal

7. Critical Analysis: This change reflects a broader shift:

From: System-driven rigidity

To: Law- aligned flexibility

However, certain concerns remain:

(a) Risk of Miscalculation: Taxpayers may:

• • Under-calculate pre-deposit:➡️ Leading to procedural complications

(b) Lack of Automated Validation: Portal now relies on:

• • Self-assessment:➡️ Increased responsibility on taxpayers and advisors

(c) Need for Clear Guidelines

• Clarification required on:
  • Adjustment of past payments
  • Treatment of interest and penalty components

8. Best Practices for Taxpayers: To avoid disputes:

✔ Reconcile Demand: Verify: Order amount vs portal reflection

✔ Compute Correct Disputed Amount: Exclude: Admitted liability: Include: Only contested portion

✔ Track Prior Payments: Maintain: DRC-03 challans: Payment references

✔ Document Justification: Clearly explain: Basis of pre-deposit calculation in appeal

✔ Monitor Post-Filing Communication: Respond promptly to: Deficiency memos: Notices from appellate authority

9. Way Forward

This update is a welcome reform, but further improvements can be considered:

• Auto-adjustment of:
  • Previous payments against pre-deposit
• Intelligent validation:
  • Based on dispute selection
• Standardized guidance notes:
  • For uniform implementation

10. Conclusion

The decision of the Goods and Services Tax Network to make the pre-deposit field editable is a progressive and taxpayer-friendly reform. It acknowledges practical challenges and restores:

Substance over system constraints

However, with flexibility comes responsibility. Taxpayers must ensure accurate computation and proper documentation to safeguard their appellate rights under the Central Goods and Services Tax Act, 2017.

3. AAR & Important Judgements:

(i) Gujarat High court decision regarding Service of Notice – Incorrect Address – Violation of Natural Justice – Proceedings Quashed

(Applicant – Sachde Roadlines)

The Gujarat High Court held:

• The Petitioner had duly updated its address and the same was available with the department.
• The department failed to serve notices at the correct address.
• Such improper service:
  • Violates principles of natural justice
  • Denies the taxpayer a fair opportunity to be heard
• Proper service of notice is a condition precedent for valid adjudication.
• Accordingly:
  • SCN, Order-in-Original, and Appellate Order were quashed
  • Department directed to initiate fresh proceedings within 12 weeks

 Service of Notice – Upload on GST Portal (Additional Notices Tab) – Not Valid Service – Violation of Section 75(4) – Interim Relief Granted

In Ramkrishna Banerjee v. Deputy Commissioner of State Tax, the Calcutta High Court held that mere uploading of notices and adjudication orders on the GST portal under the “Additional Notices and Orders” tab does not constitute valid service in law, particularly when the taxpayer is not effectively made aware of such proceedings. The Court observed that the adjudication order passed under Section 73 of the Central Goods and Services Tax Act, 2017 suffered from violation of Section 75(4), which mandates granting of an opportunity of personal hearing where an adverse decision is contemplated. The Petitioner, who became aware of the order only upon bank recovery action, challenged the proceedings on grounds of non-service and breach of natural justice, as well as the vires of notifications issued under Section 168A. The Court found that improper service and denial of hearing vitiated the adjudication process and constituted a strong prima facie case. Accordingly, it granted interim protection, restraining the department from recovery proceedings and directing lifting of bank attachment pending disposal of the writ petition, thereby reaffirming that procedural compliance, especially effective service and opportunity of hearing, is indispensable to sustain GST adjudication.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.