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2025 (5) TMI 920 - HC - GSTRejection of the Rectification Application by the respondent without assigning reasons - opportunity of hearing also not provided - violation of principles of natural justice - HELD THAT - It is an admitted fact that the petitioner had made a Rectification Application. The order of rectification which is impugned would indicate that for the reasons given in the annexure to the said order the Rectification Application is rejected. A perusal of the order does not also indicate that there had been no error apparent on the record to reject the rectification. There is also no reasonings as to why there is no error apparent on the face of the record. For this reason the impugned order dated 28.03.2025 is liable to be set aside. The principles of natural justice had been in-built by way of the 3rd Proviso to Section 161. If pursuant to a Rectification Application if a rectification is made and if it adversely affects the assessee 3rd Proviso contemplates an opportunity of hearing to be given. However when a Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained it is also imperative that the assessee should be put on notice. Conclusion - The order of rectification passed by the respondent dated 28.03.2025 is contrary to the provisions of Section 161 and in that aspect the same alone is set aside. Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
- Whether the rejection of the Rectification Application by the respondent without assigning reasons violates the statutory mandate under Section 161 of the CGST Act. - Whether the respondent was obliged to provide an opportunity of hearing before rejecting the Rectification Application filed by the petitioner. - Whether the principles of natural justice, particularly the right to be heard, apply when a Rectification Application filed by an assessee is rejected by the authority. - Whether the impugned order rejecting the Rectification Application without stating reasons or affording hearing is sustainable in law. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Requirement of assigning reasons while rejecting a Rectification Application under Section 161 of the CGST Act The legal framework revolves around Section 161 of the CGST Act, which empowers the authority to rectify any mistake apparent from the record. The provisos appended to this section prescribe procedural safeguards, including the requirement of an opportunity of hearing when the rectification adversely affects the assessee. The Court examined whether the authority must assign reasons when rejecting a Rectification Application filed by the assessee. The respondent contended that no reasons are necessary if the authority finds no apparent error and that the authority can reject the application summarily. The Court, however, found that the impugned order merely states rejection without any reasoning or explanation as to why no error apparent exists on the record. The absence of any reasoned analysis or reference to the grounds raised in the Rectification Application renders the order legally infirm. The Court noted that the order does not demonstrate any application of mind or consideration of the merits of the Rectification Application. Thus, the Court held that the rejection of the Rectification Application without assigning reasons is contrary to the principles of transparency and accountability underlying the statutory scheme. The authority is required to provide cogent reasons to justify rejection so that the assessee understands the basis of the decision and can pursue further remedies if necessary. Issue 2: Obligation to provide an opportunity of hearing before rejecting the Rectification Application The respondent argued that the proviso to Section 161 mandates an opportunity of hearing only when the authority suo motu initiates rectification that is adverse to the assessee, and not when the assessee files a Rectification Application. Hence, no hearing was necessary before rejecting the application. The Court disagreed with this narrow interpretation. It held that the proviso contemplates the principle of natural justice, entitling the assessee to be heard whenever an order is passed that adversely affects the assessee. Even if the Rectification Application is filed by the assessee, the rejection of such an application without considering the reasons or affording an opportunity to explain the grounds raised amounts to denial of natural justice. The Court emphasized that the assessee must be put on notice and given an opportunity to be heard before the authority rejects the Rectification Application, especially when the rejection affects the assessee's interests. This procedural safeguard ensures fairness and prevents arbitrary or summary dismissal of applications. Issue 3: Application of natural justice principles in the context of Rectification Applications The Court underscored that the principles of natural justice are embedded in the statutory framework through the third proviso to Section 161. These principles require that no order adverse to a person should be passed without giving that person a reasonable opportunity to present their case. In the instant case, the Rectification Application was filed by the petitioner seeking correction of an apparent error. The rejection of this application without hearing or reasoned order violates the fundamental tenets of natural justice. The Court held that such procedural lapses render the impugned order unsustainable. Issue 4: Validity of the impugned order rejecting the Rectification Application without reasons or hearing On the facts, the Court found that the impugned order dated 28.03.2025 rejected the Rectification Application without assigning any reasons or affording an opportunity of hearing. The order did not demonstrate that the authority had considered whether any apparent error existed on the record. The Court concluded that the impugned order is contrary to the provisions of Section 161 and the principles of natural justice. Consequently, the order is liable to be set aside. The Court directed the respondent to reconsider the Rectification Application afresh, after giving the petitioner an opportunity of hearing. The authority was mandated to pass a reasoned order in accordance with law. The petitioner was further permitted to pursue any remedy available under law against the fresh order. 3. SIGNIFICANT HOLDINGS "The Proviso indicates that when an order is being made adverse to the assessee, then he should be given an opportunity of being heard when the rectification adversely affects any person. The principles of natural justice had been in-built by way of the 3rd Proviso to Section 161." "When a Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained, it is also imperative that the assessee should be put on notice." "The order of rectification passed by the respondent dated 28.03.2025 is contrary to the provisions of Section 161 and in that aspect, the same alone is set aside." Core principles established include:
Final determinations:
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