Section 161, Goods and Services Tax - GST

[UmeshBabu J]

Hi all,

Client received an adjudication order U/s 73 demanding Tax from the Proper Officer (Audit), But prior to the adjudication, enforcement had raised the same issue and accepted the liability payment in GSTR-3B next financial year. The audit officer did not give opportunity of being heard before passing the order.

Assessee filed appeal. To avail benefit U.s 128A, withdrew the appeal and filed SPL-02. The officer is given SCN for rejecting application in Form SPL-03.

Whether the adjustment of liability not done by the department can be rectified U/s 161, though beyond time period. Whether it is apparent mistake?

Thanks

Posts / Replies

[YAGAY andSUN]

This is a nuanced situation involving duplicate tax proceedings (Enforcement & Audit), natural justice violations, and rectification under Section 161 of CGST Act. Let’s break it down step-by-step:

✅ Key Facts Recap:

1. Enforcement Proceedings:

   • Raised tax demand (same issue).

   • Tax was paid voluntarily via GSTR-3B in the next financial year.

   • Liability accepted and discharged.

2. Audit Proceedings:

   • Audit officer passed an order under Section 73, without providing opportunity of being heard (natural justice violation).

   • Resulted in duplicate tax demand.

3. Appeal & Withdrawal:

   • Assessee filed an appeal, later withdrew it to avail benefit under Section 128A (presumably for reduced penalty).

   • Filed SPL-02 application for relief under Section 128A.

   • Department issued SCN in SPL-03, proposing to reject the application.

💡 Issues to be Resolved:

(A) Can the Tax Paid in GSTR-3B (Earlier) be Adjusted in the Later Order?

Yes. If the tax on the same issue has already been discharged voluntarily under GSTR-3B, the Audit Officer ought to have adjusted the same in his order.

• Not doing so is against CBIC circulars and principles of natural justice.

• It amounts to double taxation.

• Payment through GSTR-3B is a valid mode of discharge under GST.

(B) Can This be Considered an “Apparent Mistake” Rectifiable Under Section 161 – Despite Time Limit Being Over?

Section 161 of CGST Act permits rectification of any error apparent on the face of the record.

Let’s analyze:

• The failure to adjust already-paid tax (for same liability, already accepted by department in enforcement proceedings) is a mistake apparent from record.

• Natural justice violation (no opportunity of being heard) is a strong ground to invalidate the order.

• However, Section 161 allows rectification within 3 months from the date of order, unless the mistake is purely clerical/arithmetic or apparent from record.

👉 Case Law Support:

• Courts have held that rectification under Section 161 can be made even beyond 3 months, in the interest of justice, especially where there’s no fresh fact-finding required and the mistake is evident from the face of record.

✅ Conclusion on 161:

Yes, non-adjustment of already-paid liability is an apparent mistake if:

• There’s no dispute on tax having already been paid.

• Enforcement and Audit are taxing the same transaction/event.

Though time period under Section 161 has lapsed, judicial precedents and principles of fairness support rectification even beyond prescribed time, where grave injustice or double taxation would otherwise occur.

📝 Recommendation:

1. Reply to SPL-03 SCN:

   • Clearly highlight the double taxation and payment via GSTR-3B.

   • Enclose proof of payment, enforcement communication, and audit order.

2. Request Rectification u/s 161:

   • File a detailed representation/application, citing:

     • Mistake apparent from record.

     • Principles of natural justice.

     • Double taxation for same issue.

     • Past CBIC circulars / clarifications supporting adjustment of tax already paid.

3. Legal Support:

   • Rely on SCN without opportunity of being heard as a violation of Section 75(4) of CGST Act.

   • Quote case laws (can be shared on request) allowing rectification even beyond the 3-month window where justice demands.

Suggested Draft reply format for SPL-03 and a template for rectification request under Section 161 tailored to this case (You can modify it as per your requirement or get it approved from your GST Consultant/ Corporate Legal/Law Department/ Advisor).

Below are two suggested drafts for your case:

📄 1. Reply Format to SPL-03 Show Cause Notice

To be filed in response to SPL-03 issued in connection with the withdrawal of appeal under Section 128A and filing of SPL-02.

[On the Letterhead of the Taxpayer / Authorized Representative]

To
The Proper Officer,
[Jurisdictional GST Officer’s Designation & Office Address]
GSTIN: [Your GSTIN]

Subject: Reply to Show Cause Notice in SPL-03 – Regarding Rejection of SPL-02 Application – Reg.

Ref:

• GSTIN: [xxxx]

• SPL-02 Application Dated: [DD/MM/YYYY]

• SPL-03 Notice Dated: [DD/MM/YYYY]

• Adjudication Order u/s 73 dated: [DD/MM/YYYY]

Respected Sir/Madam,

With reference to the above-mentioned Show Cause Notice in Form SPL-03, the following is submitted for your kind consideration:

1. Background of the Case:

   • Enforcement Wing had earlier taken up the issue related to [brief issue – e.g., non-payment of tax on XYZ supply] for which the taxpayer had accepted the liability and discharged the same voluntarily via GSTR-3B of [Month/Year].

   • Subsequently, the Audit Officer issued an Order u/s 73, demanding tax on the same issue, without granting an opportunity of personal hearing, which is in violation of Section 75(4) of the CGST Act, 2017.

   • The assessee, to avail the benefit of reduced penalty under Section 128A, withdrew the appeal and submitted Form SPL-02.

2. Issue in the SPL-03 Notice:

   • The rejection appears to be based on a perceived duplication of tax liability.

   • However, the liability was already discharged in the next financial year via GSTR-3B, prior to the adjudication order, and should have been adjusted by the adjudicating authority, as per established principles and CBIC circulars.

3. Submissions:

   • The tax liability has already been discharged voluntarily for the said period, and hence, the same liability cannot be demanded again in the audit order.

   • The non-consideration of such payment in the adjudication order is a mistake apparent from the record, and hence should be rectified under Section 161 of the CGST Act.

   • The rejection of SPL-02 on this ground is not justified and defeats the intent of Section 128A and voluntary compliance.

4. Prayer:

   • Kindly consider this reply as sufficient cause and accept the SPL-02 application under Section 128A.

   • Alternatively, the department may initiate rectification under Section 161 to correct the apparent mistake and eliminate duplicate tax demand.

Thanking you,
Yours faithfully,
[Authorized Signatory Name]
Designation:
Date:
Encl.:

• Copy of GSTR-3B showing payment

• Enforcement correspondence (if available)

• Copy of Order u/s 73

• Proof of Appeal withdrawal

• Form SPL-02 filed

📄 2. Template: Application for Rectification under Section 161 of CGST Act

To
The Jurisdictional Proper Officer,
[Office of CGST / SGST]
[Zone / Division / Range Details]
GSTIN: [Taxpayer GSTIN]

Subject: Application for Rectification of Mistake Apparent from Record under Section 161 of CGST Act – In respect of Order No. [xxxx] dated [dd/mm/yyyy]

Respected Sir/Madam,

I, [Name of Applicant], proprietor/partner/director of M/s [Name of the business], holding GSTIN [GSTIN], wish to submit this request for rectification under Section 161 of the CGST Act, 2017 in respect of the adjudication order passed under Section 73, dated [dd/mm/yyyy], on the following grounds:

1. Background:

• The said order demands tax liability on [brief description of issue].

• However, the same issue was already addressed by the Enforcement Wing, and the tax liability was voluntarily paid via GSTR-3B for the month of [Month/Year], much before the passing of this order.

2. Nature of the Mistake:

• The order fails to acknowledge and adjust the already paid tax, resulting in duplicate taxation on the same issue, which is a mistake apparent from the record.

• As per established law and departmental circulars, any liability already discharged through GSTR-3B must be adjusted in further proceedings.

3. Legal Basis:

• Section 161 allows rectification of any mistake apparent from record, which includes mathematical, clerical or obvious errors not requiring fresh investigation.

• The mistake here is purely one of non-adjustment of already accepted and paid liability, clearly visible from:

  • Enforcement communication (if any)

  • Payment in GSTR-3B

  • Order under S.73 showing the same issue

4. Request:

In view of the above, it is humbly requested that:

• The order dated [dd/mm/yyyy] be rectified u/s 161, and

• The already paid amount via GSTR-3B be considered and adjusted,

• Thereby reducing the tax demand and related interest/penalty accordingly.

I undertake to submit any further documentation or clarification as required by your office.

Thanking you,
Yours sincerely,
[Name]
[Designation]
[Mobile / Email]
[Date]

Enclosures:

1. Copy of Order u/s 73

2. Copy of GSTR-3B showing payment

3. Appeal withdrawal proof (if applicable)

4. Copy of SPL-02 and SPL-03

5. Enforcement communication (if any)

6. Any other supporting document

Disclaimer: This discussion is not an Legal Opinion.

 

[Ramanathan Seshan]

Dear sir,
 

1. Adjustment of Liability Under Section 161: Section 161 generally pertains to rectification of mistakes, but its applicability depends on the nature of the mistake. If the failure to adjust the liability is due to an error or oversight, and it is apparent on the record, then a rectification under Section 161 may be possible. However, if the issue is not an apparent mistake but rather a matter of legal interpretation or judgment, it may not qualify for rectification.

2. Beyond Time Period: Typically, rectifications under Section 161 must be made within a specific time frame. If the issue is beyond the statutory time period, it may become difficult to rectify, unless there is clear evidence of an apparent mistake that could justify the correction even outside the prescribed period.

3. Apparent Mistake: If the failure to adjust the liability is clearly a clerical or factual error, it could be considered an "apparent mistake" and might be rectifiable. For example, if the department failed to process the liability adjustment despite being aware of it, this could be seen as a mistake that is apparent from the record and might warrant correction.

In conclusion, whether the adjustment of liability can be rectified under Section 161 despite being beyond the time period depends on the specific facts and whether it constitutes an "apparent mistake." If the issue is not an apparent mistake, rectification may not be possible under Section 161.

Regards,

S Ram

[Sadanand Bulbule]

Normally rectification of mistake under Section 161 is rarely considered by the authorities for  many reasons. Secondly the time frame fixed for filing of application for rectification of mistake is three months from the date of communication of order/ decision. There is no condonation provision under Section 161 despite the merits of double payment of tax and the like that. Authorities are not given royal powers to do anything beyond the fixed time frame. It is only the High Court may consider it.

Theory sounds good, but reality is mirage.