M/S V M Kalidhas Contractor vs. The State Tax Officer

Facts

The petitioner, M/s V M Kalidhas Contractor, challenged an assessment order dated 24.02.2025 passed under Section 73 of the GST enactments, preceded by a DRC-01 notice dated 25.11.2024. The petitioner filed a rectification application on 28.04.2025, which was dismissed by the respondent State Tax Officer on 05.06.2025. The rejection order stated that rectification is permissible only for clerical errors as per Circular No.04/2025 dated 16.05.2025, and there was no error apparent on the face of the record. The petitioner sought to quash these orders, direct fresh adjudication, and declare the levy of interest, penalty, and late fees as void.

Held

The Court held that it is bound by the Division Bench decision in W.A.(MD)No.1861 of 2025, which interpreted Section 161 of the GST enactments. According to this precedent, the third proviso to Section 161, which mandates following the principles of natural justice when rectification adversely affects a person, is applicable only when an actual rectification occurs. A dismissal of a rectification application, without any alteration to the original order, does not constitute rectification. Therefore, the principles of natural justice, including the right to a personal hearing, are not required to be followed before dismissing a rectification application. Consequently, the writ petition was dismissed. However, liberty was granted to the petitioner to file a statutory appeal against the assessment order dated 24.02.2024 within 15 days from the receipt of the order, with the time consumed during the pendency of the rectification application to be excluded for limitation purposes under Section 14(2) of the Limitation Act, 1962.

Key Issues

1. Whether the principles of natural justice, specifically the right to a personal hearing, must be followed before dismissing a rectification application under Section 161 of the GST enactments, even if the dismissal does not involve rectification of an error? The petitioner argued that they were denied natural justice as the rectification application was dismissed without a personal hearing. The respondent, relying on a Division Bench decision in W.A.(MD)No.1861 of 2025 (Eminent Textile Mills Private Limited vs. State Tax Officer), contended that when a rectification application is filed by an aggrieved party and dismissed, the question of granting a personal hearing does not arise, as no rectification (alteration) has occurred. The Division Bench held that the third proviso to Section 161, requiring adherence to natural justice for rectification adversely affecting a person, is triggered only by actual rectification, not by a refusal to rectify.