Tvl Kajah Enterprises (P) LTD vs. The Assistant Commissioner (Inspection) (St Iu)

Facts

The petitioner, Tvl. Kajah Enterprises (P) Ltd., filed a Rectification Application on March 11, 2025, seeking to rectify an Order of Assessment dated January 6, 2025, for the assessment year 2022-23. The respondent, The Assistant Commissioner (Inspection) (ST-IU), rejected this application via an order dated March 28, 2025. The petitioner challenged this rejection order before the Madurai Bench of the Madras High Court, seeking to quash the rejection and direct the respondent to consider the rectification application after affording a hearing. The petitioner contended that the rejection was made without assigning reasons and without providing an opportunity of hearing. The respondent argued that reasons are not necessary for rejection if no apparent error is found and that the proviso for hearing only applies when the rectification is initiated suo motu by the officer and is detrimental to the assessee.

Held

The Court held that the impugned order dated March 28, 2025, rejecting the petitioner's Rectification Application, is liable to be set aside. The Court found that the order did not provide sufficient reasoning as to why there was no apparent error on the face of the record, which is a prerequisite for rejecting such an application. Furthermore, the Court disagreed with the respondent's contention that a personal hearing is not required when an application is made at the instance of the assessee. The Court interpreted the third proviso to Section 161 of the CGST Act to mean that an opportunity of hearing should be given when an order is made adverse to the assessee. However, the Court also observed that when a Rectification Application is made by the assessee and is being rejected without considering the reasons for rectification or by giving reasons for non-entertainability, it is imperative that the assessee be put on notice. Therefore, the order was set aside on the grounds of lack of reasoning and violation of principles of natural justice. The Rectification Application was remitted back to the respondent for fresh consideration after affording the petitioner an opportunity of hearing.

Key Issues

1. Whether the respondent's order rejecting the petitioner's Rectification Application under Section 161 of the TNGST Act (or CGST Act as referred to in arguments) is liable to be quashed for lack of reasons and opportunity of hearing, considering the petitioner's contention that the rejection was arbitrary and violative of natural justice? 2. Whether the proviso to Section 161 of the CGST Act, mandating an opportunity of hearing, is applicable only when the Assessing Officer initiates rectification suo motu and the order is detrimental to the assessee, as argued by the respondent, or whether an opportunity of hearing is also imperative when a rectification application filed by the assessee is rejected without adequate reasoning? Petitioner's Arguments: The petitioner argued that the respondent rejected the Rectification Application without assigning any reasons for not finding an apparent error and without affording an opportunity of hearing, thus vitiating the order. They relied on the principles of natural justice. Respondent's Arguments: The respondent contended that reasons are not required for rejecting a rectification application if no apparent error is found. They further argued that the proviso to Section 161, mandating a hearing, applies only when the Assessing Officer initiates rectification suo motu and the order is adverse to the assessee. Since the application was made by the petitioner, and no apparent error was identified, no hearing was necessary.