Madras HC: Refusal to Rectify Under GST Not a Rectification Itself; No Personal Hearing Required

Without a personal hearing, the GST authority can dismiss the rectification application, the Madras High Court cited.

The matter under consideration by the bench was centred on the interpretation of the third proviso to Section 161 of the TNGST Act, 2017. Specifically, the discussion focused on whether this provision necessitates adherence to the principles of natural justice when it comes to the dismissal of a rectification petition.

Section 161 of the Goods and Services Tax Act, 2017, cites the rectification of errors clear from the record.

Only when two cumulative conditions are fulfilled, the third proviso to Section 161 of CSGT, 2017 is triggered first; there should be a “rectification” (an alteration), and second, that rectification needs to “adversely affect” a person.

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The Bench of Justices G.R. Swaminathan and K. Rajasekar cited that “When the rectification application is dismissed as such without there being anything more, the original order stands as such. In that event, there is no rectification at all. When there is no rectification, there is no question of invoking the principles of natural justice.”

The taxpayer in this case is engaged in the business of manufacturing cotton textiles. Under Section 65 of the Tamil Nadu Goods and Services Tax Act, 2017, a GST audit was conducted during which specific discrepancies were identified.

The department has issued a Show Cause Notice (SCN) to the taxpayer. An opportunity for a personal hearing was granted; it was not taken by the taxpayer. Therefore, an order was passed by the department levying tax, interest and penalty. The taxpayer applied to rectify the order issued, though it was rejected.

The taxpayer, dissatisfied with it, has furnished a writ petition, which was dismissed by the Single Judge.

As per the taxpayer, the rectification application cannot be dismissed without furnishing a chance of a personal hearing. Therefore, it breaches the principles of natural justice.

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The bench cited that “it is entirely another thing to say that the third proviso to Section 161 of TNGST Act demands following the principles of natural justice even when there is no rectification. A plain reading of the said proviso does not yield any conclusion that formation of an adverse view while disposing of the rectification application would require complying with the principles of natural justice. That is not the plain meaning of the proviso.”

The bench, without modification no rectification, will be there. The applicability of the third proviso will be there when there is rectification, and it affects a person. Or it can be said that both elements should be there for the third proviso to be applicable.

The bench further said that when the legislature has shown that the principles of natural justice need to be complied with, it is not for the Madras High Court to add additional circumstances or situations. The third proviso quotes rectification, which is a positive act. “Refusal to rectify” cannot be read into the expression “such rectification”.

As per the bench, there is no need to dismiss the application for rectification; the authority would be required to hear the applicant. The order of the Single Judge has been validated by the bench.

The bench in the above has dismissed the same petition.