Time spent pursuing a rectification application under Section 161 of the CGST Act, is excluded while computing the limitation period for filing appeal.

The Hon’ble Punjab & Haryana High Court in Arvind Fashion Limited v. State of Haryana & Ors. [2025 (10) TMI 963 - PUNJAB AND HARYANA HIGH COURT] held that when an assessee promptly files a rectification application against an assessment order, the period spent awaiting decision on rectification is to be excluded from the limitation period for filing appeal under Section 107CGST Act. The appellate authority erred in holding the appeal time-barred by not considering this exclusion. Where there is no mala fide or delay attributable to the assessee, time awaiting rectification decision is to be discounted.

Facts:

Arvind Fashion Limited ('the Petitioner') is a GST-registered entity. An assessment order in Form DRC-07 under Section 73 was issued, based on a difference in ITC claimed as per GSTR-2A and GSTR-3B, and on improper GST imposition concerning “other expenses” in the group’s consolidated PAN-India accounts instead of Haryana-specific figures.

The Petitioner promptly filed a rectification application under Section 161 together with the requisite pre-deposit of 10%. During the pendency of rectification, the Petitioner refrained from filing appeal. When rectification was denied, the Petitioner then filed an appeal, which was dismissed by the Appellate Authority as time-barred with a 109-day delay.

The Petitioner contended that the limitation period for filing appeal should exclude time spent earnestly awaiting rectification under Section 161, as a favourable outcome could have rendered an appeal unnecessary.

The Respondent contended that filing an appeal alongside rectification was available; not doing so made the delay in appeal inexcusable.

The Petitioner, aggrieved by the dismissal of its appeal as time-barred, approached the High Court via writ petition under Article 226, seeking exclusion of the period pending rectification decision.

Issue:

Whether the time spent awaiting decision on a bona fide rectification application under Section 161CGST Act is excludable in calculating limitation for filing appeal under Section 107 and whether the appellate authority erred in dismissing the appeal as time-barred?

Held:

The Hon’ble Punjab & Haryana High Court in 2025 (10) TMI 963 - PUNJAB AND HARYANA HIGH COURT held as under:

• Observed that, when the Petitioner was admittedly awaiting a decision on rectification, there was no inordinate delay or ulterior motive, and exclusion of such period from limitation is fair.
• Noted that, the Revenue’s argument that assessee could file an appeal alongside rectification is unjustified because had rectification succeeded, an appeal would have been redundant, which supports assessees’ right to await rectification outcome.
• Noted that, in cases where genuine pursuit of rectification exists, the limitation for appeal starts post-rectification outcome, and the intermediary period is to be excluded.
• Held that, in such bona fide cases with no mala fides or delay tactics, the appellate authority's refusal to condone delay was erroneous and set aside appellate order dismissing the appeal as time-barred and remanded for fresh adjudication on merits, directing the authority to exclude rectification period from computation of delay.

Our Comments:

This ruling provides welcome procedural relief to taxpayers acting in good faith, reinforcing that recourse to rectification is not a ground to forfeit appeal rights, and the law must accommodate judicial economy and fairness. The judgment diverges from hyper-technical views requiring appeal and rectification simultaneously and instead supports practical and fair cause standards for limitation computation. If malafide or dilatory intent is shown, exclusion may not apply, as clarified by the Court.

Relevant Provisions:

Section 161 of the CGST Act, 2017:

“161. Rectification of errors apparent on the face of record.-

Without prejudice to the provisions of section 160, and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under the State Goods and Services Tax Act or an officer appointed under the Union Territory Goods and Services Tax Act or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be:

Provided that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document:

Provided further that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission:

Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.”

(Author can be reached at [email protected])