2025 (6) TMI 1251 - HC - GST

Rejection of rectification application on the reason that that petitioner failed to submit the rectification application within the statutory period of six months as contemplated under Section 161 of the GST Act - HELD THAT - When coming to the reasons mentioned in Ext.P14 for rejecting the request of the petitioner it was only because of the fact that the rectification application was not filed through the portal within the time limit and therefore the rectification order in respect of Ext.P8 could not have been passed. However in Ext.P14 the fact that the petitioner had intimated this aspect by way of email as early as on 01.02.2024 is admitted which is within the statutory period contemplated under Section 161 of the GST Act. As far as the invocation of the powers under Section 161 of the GST Act is concerned it is not confined to a situation where the aggrieved party approaches the authority with an application for rectification. When an error is brought to the notice of the officer concerned or otherwise the officer becomes aware of such error which is apparent on the face of record the officer concerned can suo motu initiate the proceeding of rectification as well. In this case since there is admittedly a duplication of the orders based on two proceedings initiated alleging the same irregularities there was an error apparent on the face of the records as far as Ext.P8 order is concerned. Therefore it is a matter which ought to have been rectified as it results in two mutually conflicting orders passed on the same issue by the Officers of the same Department. Ext.P7 being the first order passed by the officer concerned accepting the explanation offered by the petitioner the second order namely Ext.P8 which is contrary to the finding in Ext.P7 could not have been passed. This writ petition is disposed of quashing Exts.P8 and P14 as the adjudication on the discrepancies highlighted in the show cause notices for the assessment year 2017-2018 stood concluded by way of Ext.P7 order.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the second adjudication order (Ext.P8), passed subsequent to an earlier order (Ext.P7) on the same issues and facts, is legally sustainable.

- Whether the order rejecting the petitioner's request for rectification (Ext.P14) on the ground of non-submission of a rectification application through the prescribed GST portal within the statutory six-month period under Section 161 of the CGST Act, 2017, is valid.

- Whether the authorities are obligated to initiate rectification proceedings suo motu upon becoming aware of an apparent error on the face of the record, even if a formal rectification application is not filed through the portal.

- The scope and application of Section 161 of the CGST Act concerning rectification of orders, particularly in cases of duplication or conflicting orders passed on the same issue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the second adjudication order (Ext.P8) passed after the earlier order (Ext.P7) on the same facts and issues

The legal framework governing this issue primarily involves the principles of finality of orders and avoidance of conflicting adjudications under the CGST Act, 2017. The Court recognized that Ext.P7 was the first order passed, which dropped the proceedings after accepting the petitioner's explanation regarding the discrepancies for the financial year 2017-2018. Subsequently, Ext.P8 was passed by another officer on the same issues but with a contrary conclusion, rejecting the explanation and finalizing the proceedings against the petitioner.

The Court held that the existence of two conflicting orders on the same facts and issues by officers of the same department is untenable. The second order (Ext.P8) was passed after the first order (Ext.P7) had already accepted the explanation and concluded the proceedings. This constituted an "apparent error on the face of the record" as the second order could not stand in the face of the first.

Thus, the Court concluded that Ext.P8 was invalid and unsustainable as it represented a duplication of proceedings and conflicting adjudications on the same matter.

Issue 2: Legality of rejecting the petitioner's rectification request on the ground of non-submission through the GST portal within six months under Section 161

Section 161 of the CGST Act provides a statutory mechanism for rectification of orders within six months from the date of communication of the order. The respondent authority rejected the petitioner's request for rectification (Ext.P14) on the sole ground that the petitioner had not filed a formal rectification application through the GST portal within the prescribed six-month period, despite the petitioner having sent an email communication (Ext.P9) within the statutory period highlighting the duplication error.

The Court examined the scope of Section 161 and emphasized that the provision is not strictly confined to formal rectification applications filed by the aggrieved party through the designated portal. The Court held that when an error apparent on the face of the record is brought to the notice of the officer or becomes known to the officer in any manner, the officer has the authority and duty to initiate rectification proceedings suo motu.

In this case, since the petitioner had communicated the error by email within the statutory period, the authority was obliged to consider and rectify the error notwithstanding the absence of a formal portal application. The rejection of the rectification request solely on the basis of procedural non-compliance was therefore found to be legally unsustainable.

Issue 3: Obligation of authorities to initiate rectification suo motu upon awareness of apparent errors

The Court underscored that the power to rectify under Section 161 is not limited to reactive proceedings initiated only upon formal applications. The provision contemplates that if the officer concerned becomes aware of an apparent error on the face of the record, the officer can and should initiate rectification suo motu.

Given the admitted duplication of orders and conflicting findings, the Court found that the error was sufficiently apparent and that the authority's failure to invoke rectification powers on its own motion was improper.

Issue 4: Effect of quashing conflicting orders and finality of the first order (Ext.P7)

The Court observed that since Ext.P7 was the first order accepting the petitioner's explanation and concluding the proceedings, and Ext.P8 was a subsequent conflicting order, the adjudication on the discrepancies stood concluded by Ext.P7. Consequently, the conflicting second order (Ext.P8) and the subsequent order rejecting rectification (Ext.P14) were quashed.

3. SIGNIFICANT HOLDINGS

"As far as Ext.P8 order is concerned, there is an apparent error on the face of records."

"The invocation of the powers under Section 161 of the GST Act is not confined to a situation where the aggrieved party approaches the authority with an application for rectification. When an error is brought to the notice of the officer concerned or otherwise the officer becomes aware of such error which is apparent on the face of record, the officer concerned can suo motu initiate the proceeding of rectification as well."

"When such a serious error was clearly pointed out before the competent authority, within the statutory period contemplated under Section 161 for rectification, such authority could not have refrained from invoking the powers of rectification."

"The reason which formed the basis of Ext.P14, by which the request of the petitioner was declined, cannot be said to be legally sustainable."

Core principles established include:

• The finality of an adjudication order once passed and accepted, precluding conflicting subsequent orders on the same issue.
• The scope of rectification under Section 161 is broad enough to empower authorities to act suo motu upon awareness of an apparent error, not limited to formal rectification applications.
• Procedural non-compliance in filing rectification applications through the prescribed portal does not preclude rectification if the error is brought to the authority's attention within the statutory period by other means.

Final determinations:

• Ext.P8 order was quashed as it was a duplicate and conflicting order passed after Ext.P7 had concluded the matter.
• Ext.P14 order rejecting rectification was quashed as the authority erred in refusing to rectify the apparent error on procedural grounds.
• The adjudication for the assessment year 2017-2018 stood conclusively finalized by Ext.P7 order.