2025 (7) TMI 992 - HC - GST

Third proviso to Section 161 TNGST Act applies only when rectification occurs, not when applications dismissed

M/s. Eminent Textiles Mills Private Limited, Rep. by its Director, R. Balaguru Versus The State Tax Officer, The Assistant Commissioner (ST) -2, The Deputy Commissioner (Appeals), Tirunelveli

The HC dismissed an appeal regarding rectification applications under Section 161 of TNGST Act, 2017. The court held that the third proviso requiring ... Rectification of errors apparent on the face of record - Personal hearing was granted but not availed - Violation of principles of natural justice - HELD THAT:- An order dismissing a rectification application is also an adverse decision. The question that calls for consideration is whether the third proviso to Section 161 of TNGST Act, 2017 requires complying with the principles of natural justice even for dismissing a rectification petition. To answer this question, we have to read the provision in its entirety. The provision had already been extracted in full. It is seen that the main provision empowers the assessing officer to rectify any error which is apparent on the face of the record either on his own motion or when it is brought to his notice by any officer appointed under TNGST Act or CGST Act or by the affected person. Rectification in the very nature of things involves alteration. Where there is no alteration, there is no rectification. The third proviso will kick in only when there is rectification and the said rectification affects any person. In other words, these two elements must be present to trigger the application of the third proviso. When the rectification application is dismissed as such without there being anything more, the original order stands as such. In that event, there is no rectification at all. When there is no rectification, there is no question of invoking the principles of natural justice. It is one thing to say that the principles of natural justice must be read into the Section. It is entirely another thing to say that the third proviso to Section 161 of TNGST Act demands following the principles of natural justice even when there is no rectification - The third proviso talks of rectification which is a positive act. “Refusal to rectify” cannot be read into the expression “such rectification”. This situation is not envisaged by the third proviso. There is no requirement that before dismissing the rectification application, the authority must hear the applicant. The order of the learned Single Judge is confirmed - Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:- Whether the dismissal of a rectification application under Section 161 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) without affording an opportunity of personal hearing violates the principles of natural justice.- The scope and applicability of the third proviso to Section 161 of the TNGST Act, which mandates that 'where such rectification adversely affects any person, the principles of natural justice shall be followed.'- Whether the principles of natural justice are triggered when a rectification application is dismissed without any actual rectification being made.- The interpretation of the term 'rectification' under Section 161 and whether refusal to rectify constitutes 'rectification' attracting the requirement of natural justice.- The permissibility of the assessing authority to reject rectification applications without hearing the applicant.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether dismissal of rectification application without hearing violates principles of natural justiceRelevant legal framework and precedents: Section 161 of the TNGST Act empowers the authority to rectify errors apparent on the face of record either suo motu, on reference from officers, or on application by the affected person. The third proviso mandates adherence to principles of natural justice when rectification adversely affects any person. Precedents relied upon by the appellant include a decision of this Court in Suriya Cement Agency and decisions of the Delhi High Court and other High Courts, which held that adverse decisions on rectification applications require prior hearing.Court's interpretation and reasoning: The Court examined the language of Section 161, especially the third proviso, and noted that 'such rectification' refers to a positive act of correcting or amending an order. The Court emphasized that rectification necessarily involves alteration or correction of an error. If a rectification application is dismissed without any alteration, there is no rectification at all. Therefore, the third proviso's requirement of following natural justice applies only when an actual rectification adversely affecting a person is made.Key evidence and findings: The Court noted that the impugned order dismissed the rectification application without making any changes to the original order. Hence, no rectification took place. The Court also analyzed the provision's language and legislative intent, concluding that refusal to rectify is not 'rectification' within the meaning of the proviso.Application of law to facts: Since the rectification application was dismissed without any rectification, the principles of natural justice as mandated by the third proviso were not triggered. The authority was not required to afford a personal hearing before rejecting the application.Treatment of competing arguments: The Court respectfully disagreed with the appellant's reliance on earlier decisions that mandated hearing before dismissal of rectification applications. It held that those decisions erred in extending the scope of the third proviso beyond its plain language.Conclusion: The Court concluded that dismissal of a rectification application without hearing does not violate natural justice under Section 161, provided no rectification is made that adversely affects the applicant.Issue 2: Interpretation of the term 'rectification' and scope of the third proviso to Section 161Relevant legal framework and precedents: The Court referred to the definition of 'rectify' as correcting or amending, citing P. Ramanatha Aiyar's Advanced Law Lexicon. It also examined the text of Section 161 and the corresponding provision in the Central Goods and Services Tax Act, which is in pari materia.Court's interpretation and reasoning: The Court emphasized that 'rectification' involves a positive alteration. The third proviso applies only when such rectification adversely affects a person. The Court distinguished between a refusal to rectify (which leaves the original order intact) and actual rectification (which changes the order). The former does not attract the proviso's requirement of natural justice.Key evidence and findings: The Court found that the legislature consciously limited the application of natural justice to cases where rectification is effected and adversely affects a person. The Court declined to expand the scope of the proviso to include dismissal of rectification applications without hearing.Application of law to facts: Since the authority's order was a refusal to rectify, it did not amount to rectification adversely affecting the appellant, and thus the third proviso was not triggered.Treatment of competing arguments: The Court rejected the appellant's contention that principles of natural justice must be followed even when the rectification application is dismissed without rectification.Conclusion: The Court held that the third proviso to Section 161 requires natural justice only when actual rectification adversely affects a person; mere dismissal of rectification applications without rectification does not attract this requirement.Issue 3: Remedy and procedural directionsCourt's reasoning: While dismissing the writ appeal, the Court noted that the appellant could still avail the statutory remedy of appeal against the original order. It granted two weeks' time for filing the appeal, which would be entertained without regard to limitation, subject to compliance with other statutory requirements.Conclusion: The Court confirmed the order of the Single Judge dismissing the writ petition and directed the appellant to pursue the appeal remedy within the extended time.3. SIGNIFICANT HOLDINGS'It is obvious that the words 'such rectification' refer to rectification contemplated in the main provision... The word 'rectification' means correction of an error or removal of a defect... The third proviso will kick in only when there is rectification and the said rectification affects any person... When the rectification application is dismissed as such without there being anything more, the original order stands as such. In that event, there is no rectification at all. When there is no rectification, there is no question of invoking the principles of natural justice.''The third proviso talks of rectification which is a positive act. 'Refusal to rectify' cannot be read into the expression 'such rectification'. This situation is not envisaged by the third proviso.''There is no requirement that before dismissing the rectification application, the authority must hear the applicant.'Core principles established:The requirement of natural justice under the third proviso to Section 161 of the TNGST Act applies only when an actual rectification adversely affecting a person is made.Dismissing a rectification application without making any rectification does not amount to an adverse order requiring a hearing.The term 'rectification' implies a positive correction or amendment, and refusal to rectify is distinct from rectification.Statutory appeal remedies remain available even if a rectification application is dismissed without hearing.Final determinations:The impugned order dismissing the rectification application without hearing did not violate principles of natural justice.The Single Judge's order dismissing the writ petition was upheld.The appellant was granted time to file an appeal against the original order, which would be entertained without limitation.