TaxTMI 
TaxTMI 
TaxTMI 
1. Introduction
The Goods and Services Tax law prescribes a rigid limitation framework for filing statutory appeals. Section 107 of the GST Acts allows an appeal within three months, with a further condonable period of one month, beyond which appellate authorities lack jurisdiction. This rigidity has frequently resulted in dismissal of appeals on technical grounds, even where taxpayers have acted bona fide.
A recurring practical issue arises when an assessee, instead of immediately filing an appeal, first invokes Section 161 for rectification of errors apparent on record. The question then is whether the time spent in pursuing such rectification can be excluded while computing limitation for filing an appeal.
This issue has been decisively addressed by the Allahabad High Court in M/s Prakash Medical Stores v. Union of India & Ors. The judgment has far-reaching implications for GST litigation and appellate practice.
2. Brief Facts of the Case
An ex-parte adjudication order under Section 73 of the UP GST Act was passed against the assessee for FY 2018-19, creating substantial tax, interest, and penalty demands. Instead of directly filing an appeal, the assessee filed a rectification application under Section 161 within the prescribed period.
The rectification application was rejected as not maintainable. Thereafter, the assessee filed an appeal under Section 107. The appellate authority dismissed the appeal as time-barred, holding that it was filed beyond the maximum period of four months from the date of the original order.
Aggrieved, the assessee approached the High Court.
3. Statutory Provisions Involved
3.1 Section 107 – Appeals
- Appeal to be filed within three months from the date of communication of the order
- Delay condonable for a further period of one month only
The provision is generally understood as a self-contained code, excluding Section 5 of the Limitation Act.
3.2 Section 161 – Rectification of Errors
- Rectification of errors apparent on the face of record
- Application to be made within three months (six months in limited cases)
- Remedy is statutory and independent of appeal
4. Core Issue Before the Court
Whether the period spent in bona fide prosecution of rectification proceedings under Section 161 can be excluded while computing limitation for filing an appeal under Section 107, by applying the principle underlying Section 14 of the Limitation Act, 1963.
5. Decision and Judicial Reasoning
5.1 Section 5 vs. Section 14 of the Limitation Act
The Court drew a clear distinction between:
- Condonation of delay (Section 5) – which stands excluded due to the limited condonation power under Section 107(4); and
- Exclusion of time (Section 14) – which operates by removing a period from computation altogether.
Relying heavily on the Supreme Court decision in M.P. Steel Corporation v. CCE, the Court held that exclusion of time does not amount to extension of limitation and therefore does not conflict with the statutory cap under GST law.
5.2 Applicability of Section 14 Principles to GST Proceedings
Though the Limitation Act does not apply in terms to GST proceedings, the Court held that the equitable principle underlying Section 14 applies to quasi-judicial proceedings, including tax appeals.
The Revenue’s reliance on Hongo India Pvt. Ltd. and Glaxo Smith Kline Consumer Health Care Ltd. was rejected, as those cases relate to exclusion of Section 5 and not Section 14.
5.3 Rectification as a Bona Fide Statutory Remedy
The Court emphasised that:
- Rectification under Section 161 is a recognised statutory remedy
- Filing such an application within limitation cannot be treated as negligence or lack of due diligence
- Once rectification is filed within time, limitation for filing appeal remains in abeyance during its pendency
The benefit of exclusion would be denied only if the rectification application itself is filed beyond limitation.
6. Ratio of the Judgment
Time spent in bona fide prosecution of rectification proceedings under Section 161 of the GST Act is liable to be excluded while computing limitation for filing appeal under Section 107, by applying the underlying principle of Section 14 of the Limitation Act, 1963.
7. Significance and Consequences
For Taxpayers
- Prevents loss of appellate remedies due to bona fide procedural choices
- Particularly beneficial in cases of ex parte adjudication and apparent errors
For Appellate Authorities
- Appeals cannot be rejected mechanically on limitation without examining the exclusion of time
- Authorities must distinguish between condonation and exclusion
For GST Litigation
- Reduces avoidable writ petitions arising from technical dismissals
- Aligns GST procedure with principles of natural justice
8. Practical Takeaways for Professionals
- Rectification applications should be filed strictly within prescribed time
- Appeals should specifically plead exclusion of time on Section 14 principles
- In high-value matters, filing a protective appeal may still be advisable
9. Way Forward
The ruling highlights the need for administrative clarity on the interaction between Sections 107 and 161. A clarificatory circular or legislative recognition of suspension of limitation during rectification proceedings would significantly reduce procedural litigation.
Until GST Appellate Tribunals become fully operational, such High Court pronouncements will continue to shape GST procedural jurisprudence.
10. Conclusion
The Allahabad High Court’s decision in Prakash Medical Stores restores balance between statutory limitation and substantive justice. By recognising the applicability of Section 14 principles, the Court has ensured that GST law does not penalise taxpayers for bona fide pursuit of statutory remedies. The ruling is a welcome and necessary development in GST appellate jurisprudence.
By: CA. Chitresh Gupta
Mobile: 99103 67918
https://www.linkedin.com/in/ca-chitresh-gupta-22795920/
This article is intended for academic and professional discussion and reflects the legal position emerging from statutory interpretation and judicial precedents.