2025 (1) TMI 43 - HC - GST

Rejection of application for rectification of error apparent on the face of record under Section 161 of the GST Act - mismatch between GSTR-3B and GSTR-2A and between GSTR-3B and GSTR-7 - HELD THAT - The petitioner has filed an application for rectification under Section 161 of the Act on the premise, that the impugned order dated 25.04.2024, insofar as it levies tax on the very same discrepancies between GSTR-7 and GSTR-3B, which had been dropped on two earlier occasions, suffers from error apparent on the face of record. However, the same was rejected vide order dated 18.07.2024 on the premise that the circumstances do not warrant exercise of power under Section 161 of the Act, inasmuch as the petitioner had not replied to the notices issued before the assessment was made. Conclusion - The principles of procedural fairness and the necessity of providing parties with an opportunity to respond to allegations or discrepancies before final orders are made. The petitioner may treat the impugned order as a show cause notice and submit its objections within a period of two (2) weeks from the date of receipt of a copy of this order along with supporting documents/material. Petition closed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the impugned proceedings in Form GST DRC-07 dated 29.04.2024, along with the detailed annexure dated 25.04.2024, and the order dated 18.07.2024 rejecting the application for rectification under Section 161 of the GST Act, are valid.
Whether the discrepancies between GSTR-7 and GSTR-3B, which were previously resolved, can be revisited and reassessed in the current proceedings.
Whether the petitioner was denied a fair opportunity to respond to the notices, and if the rejection of the rectification application was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Impugned Proceedings

Relevant Legal Framework and Precedents: The proceedings were challenged under the provisions of the GST Act, particularly focusing on Section 161 which deals with rectification of errors apparent on the face of the record.
Court's Interpretation and Reasoning: The court examined whether the discrepancies that had been previously resolved could form the basis of new proceedings. It noted that the same issues had been dropped on two prior occasions.
Key Evidence and Findings: The petitioner had previously paid the taxes due on the discrepancies, and the proceedings were dropped, as evidenced by the orders dated 16.08.2023 and 21.08.2023.
Application of Law to Facts: The court considered the procedural history and the fact that the same discrepancies were being revisited without new evidence or justification.
Treatment of Competing Arguments: The respondents argued that the petitioner failed to reply to the notices, but the court questioned the basis for the enhanced figures and demand.
Conclusions: The court did not find the issuance of the impugned proceedings justified and allowed the petitioner to treat the order as a show cause notice, permitting them to submit objections.

Issue 2: Fair Opportunity to Respond

Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case.
Court's Interpretation and Reasoning: The court noted that the petitioner should have been given an opportunity to respond to the enhanced demand figures.
Key Evidence and Findings: The petitioner had filed an application for rectification, which was rejected on the grounds of non-response to notices.
Application of Law to Facts: The court emphasized the need for procedural fairness and the opportunity for the petitioner to present objections.
Treatment of Competing Arguments: The respondents initially held that the petitioner could not challenge the assessment due to non-response, but later agreed to allow objections.
Conclusions: The court allowed the petitioner to submit objections within two weeks, ensuring a fair hearing process.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The court stated, "the petitioner may treat the impugned order as a show cause notice and submit its objections within a period of two (2) weeks from the date of receipt of a copy of this order along with supporting documents/material."
Core Principles Established: The judgment reinforced the principles of procedural fairness and the necessity of providing parties with an opportunity to respond to allegations or discrepancies before final orders are made.
Final Determinations on Each Issue: The court closed the writ petition, allowing the petitioner to file objections to the impugned order, which would be considered afresh by the respondents.

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