What an appeal actually costs before it is heard

The decision to appeal is usually presented as a question about the merits. In practice, in the first fortnight, it is a question about cash and about dates. Both are computable, and doing so early changes the decision more often than people expect.

Pre-deposit is the price of being heard

Neither the GST law nor the Customs Act lets you argue an appeal without putting money down first. There is no stay application and no discretion. The deposit is a condition of the appeal being entertained, and once it is made, recovery of the balance stays suspended while the appeal is pending. That is the practical reason the figure matters more than the merits in the first two weeks.

The GST arithmetic

At the first appeal, the appellant pays in full the part of the demand that is admitted, and in addition a sum equal to ten per cent of the remaining tax in dispute, subject to a statutory ceiling Section 107(6), CGST Act 2017. Where the order involves only a penalty and no tax, the percentage runs on the penalty.

At the Tribunal, a further ten per cent of the tax in dispute is payable, and the statute says it is in addition to what was paid under the first appeal provision Section 112(8), CGST Act 2017. That word matters. Two stages of appeal under this law mean two deposits, not one topped up.

The Customs arithmetic

The Customs Act works differently. Seven and a half per cent of the duty, or of the penalty where only a penalty is in dispute, is deposited for an appeal to the Commissioner (Appeals), and ten per cent where the appeal lies to the Tribunal, subject to a ceiling Section 129E, Customs Act 1962. The requirement at the Tribunal stage is expressed as a total rather than as an addition, so what was deposited at the first appeal counts towards it and only the balance is paid.

The two regimes therefore produce very different second appeal numbers on the same facts. That is not an anomaly to be smoothed over. It is the statute, and it has to be computed regime by regime.

The ceilings

Both regimes cap the deposit. Under the GST law the ceiling applies separately under the central and the state enactment. Under the Customs Act there is a single ceiling. On a very large demand the cap is what makes an appeal fundable at all, and it is worth identifying early because it changes the shape of the decision.

The windows that cannot be extended

This is where most avoidable losses happen.

• Under the GST law, an appeal to the Appellate Authority is filed within three months of communication of the order Section 107(1). The authority may allow a further one month on sufficient cause Section 107(4). Beyond four months it has no power to admit the appeal at all.
• Under the Customs Act, an appeal to the Commissioner (Appeals) is filed within sixty days, with a further thirty days condonable Section 128(1). Ninety days is the end of it.
• An appeal to the Tribunal under either law runs three months from communication Section 129A(3) and Section 112(1).

Condonation is not a second deadline. It is a discretion exercised on sufficient cause shown, and pressure of work is not sufficient cause. Treat the first date as the date.

What the deposit is not

It is not a payment of the demand. Where the appeal succeeds the amount is returned, and the statutes provide for interest on it. It should be accounted for accordingly, and it is worth saying so to a board that reads the deposit as a loss crystallising.

Deciding whether to appeal at all

Once the number and the dates are known, the decision becomes a comparison rather than an argument. Four things go into it.

1. The deposit against the exposure. A ten per cent deposit on a demand you are confident about is cheap. The same deposit on a matter that is genuinely weak is the beginning of several years of cost.
2. What the record below actually says. An appeal works from the record. If the grounds were never taken and the documents were never annexed, the appeal is being run on a file that was built for a different purpose.
3. Whether the order left something unanswered. An order that does not deal with a ground raised is vulnerable in a way that an order which deals with it badly is not.
4. Whether the matter is repeating. Where the same issue arises every year, an unappealed order becomes the department's precedent against you, and the cost of the appeal has to be set against every future year rather than one.

The order of work in the first fortnight

1. Diarise the appeal date and the condonation limit from the date of communication.
2. Compute the pre-deposit under the correct provision, applying the ceiling.
3. Arrange the funds. This takes longer than the drafting and it is the commonest cause of a late filing.
4. Read the order for what it did not answer.
5. Draft the grounds around the record, not around the argument you wish you had made.
6. File, with the certified copy inside the period the rules require.

The deposit is an input to the decision, not the decision. But it is a number, it is knowable on day one, and businesses that work it out on day one make better decisions than those that work it out on day forty.