2025 (10) TMI 719 - HC - GST

Mandatory personal hearing under third proviso to Section 161 CGST; rectification breached natural justice, appeal filing allowed

Future Consumer Limited Versus Union Of India And Ors.

HC rejected the challenge to the unsigned order-in-original, holding that the accompanying DRC-07 identifying the official and ward cured that defect. The ... Validity of impugned order - impugned order does not bear the signature of the official who has passed the order - rectification order u/s 161 of the CGST Act, 2017 affecting the taxpayer adversely, can be passed without affording a personal hearing - violation of principles of natural justice - HELD THAT:- With respect to the contention regarding the unsigned order-in-original, this Court is of the view that once an order-in-original is accompanied by a DRC-07 which is duly containing the name of the official, the designation and the ward etc., such an objection would not be tenable. In the present case, the DRC-07 issued along with the impugned order contains all the necessary details of the concerned official as well as the department passing the said order. Hence, this contention of the Petitioner is rejected. This Court is of the view that a personal hearing would be mandatory in terms of the third proviso of Section 161 of the Central Goods and Service Tax Act, 2017 - The Court further notes that the impugned order dated 24th August, 2024 is an appealable order. In view of the infraction of the principles of natural justice in deciding the order of rectification dated 26th December, 2024, this Court, in exercise of its power under writ jurisdiction, is inclined to permit the Petitioner to file an appeal against the impugned order dated 24th August, 2024 - let the appeal be filed by the Petitioner against the impugned order by 30th November, 2025 along with the requisite pre-deposit. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether an order-in-original is invalid for want of the adjudicating officer's signature where it is accompanied by a DRC-07 containing the name, designation and credentials of the officer who uploaded the order on the GST portal. 2. Whether a rectification order under Section 161 of the Central Goods and Services Tax Act, 2017 that adversely affects a person can be passed without affording a personal hearing to the affected person (scope and applicability of the third proviso to Section 161). 3. Whether, in light of a failure to afford the mandatory personal hearing under Section 161, the High Court should permit filing of an appeal against the impugned order notwithstanding limitation, and the consequences to the appellate process (remedy and direction to appellate authority). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of an unsigned order-in-original when accompanied by DRC-07 Legal framework: Statutory and procedural requirements for issuance of orders under the GST regime; administrative practice of uploading orders on the GST portal with officer credentials and issuance of DRC-07 as a summary/receipt. Precedent Treatment: No specific precedent was relied upon by the Court to invalidate an order for mere absence of a handwritten or digitally visible signature where the statutory/administrative record (DRC-07) identifies the officer and contains designation and ward details. Interpretation and reasoning: The Court held that where the order-in-original is accompanied by a DRC-07 that duly contains the name, designation and other necessary particulars of the officer and the department passing the order, the objection that the order itself does not bear a signature is untenable. The Court noted the post-1 June 2024 mechanism on the GST portal requiring officers who upload orders to do so with their credentials, reducing the possibility of irregularity. The presence of the DRC-07 with requisite particulars supplies the identification and authentication function attributed to a signature in the administrative context. Ratio vs. Obiter: Ratio - The Court's holding that absence of a signature on the order does not invalidate the order where a DRC-07 with officer identification accompanies it and the portal mechanism records credentials. Conclusion: The unsigned impugned order-in-original is not invalidated on the ground of lack of signature where a DRC-07 containing the officer's name and designation and the portal credentials accompany the order; the contention is rejected. Issue 2: Requirement of personal hearing for rectification under Section 161 when the rectification adversely affects a person Legal framework: Section 161, Central Goods and Services Tax Act, 2017 - power to rectify errors apparent on the face of record; provisos including limitation periods and the third proviso mandating principles of natural justice where rectification adversely affects any person. Precedent Treatment: The Court relied on its own prior reasoning in a contemporaneous decision (W.P. (C) 4506/2025) and referred to reasoning in a Madras High Court decision (Suriya Cement Agency) to the effect that the third proviso requires an opportunity of hearing when rectification adversely affects the assessee, and that a bare rejection without reasons or notice is contrary to Section 161. Interpretation and reasoning: The Court interpreted the third proviso as an inbuilt principle of natural justice obliging affording personal hearing where a rectification would have adverse consequences. The Rectification Order under scrutiny (dated 26th December, 2024) was found to have been passed without affording a personal hearing to the petitioner. The Court emphasized that application of Section 161 requires the authority to put the affected person on notice and consider submissions where the rectification has adverse effect; merely treating a rectification application summarily or rejecting it without hearing is impermissible. Ratio vs. Obiter: Ratio - Where rectification under Section 161 adversely affects a person, the authority must follow principles of natural justice (i.e., afford a personal hearing) before passing any rectification; absence of personal hearing renders the rectification order vitiated. Obiter - Observations on portal mechanisms and procedural practices were explanatory but not foundational to the ruling on Section 161. Conclusion: The rectification order passed without affording a personal hearing is contrary to Section 161's third proviso and is set aside; the rectification application must be reconsidered after giving a personal hearing. Issue 3: Relief in writ jurisdiction - permission to file appeal despite procedural limitation and directions to appellate authority Legal framework: Writ jurisdiction of the High Court to grant appropriate relief where statutory requirements of natural justice are breached; appellate remedy under GST law and pre-deposit requirements for filing appeal. Precedent Treatment: The Court applied its discretion under writ jurisdiction to mitigate consequences of the procedural infirmity in rectification process; prior decisions emphasizing that where natural justice breach affects appellate rights, courts may grant indulgence regarding limitation to secure adjudication on merits. Interpretation and reasoning: The Court found that the rectification order's procedural infirmity (no personal hearing) impacted the petitioner's ability to pursue statutory remedies. To obviate prejudice caused by the breach, the Court exercised writ powers to permit the filing of an appeal against the impugned order (the original demand order) within a stipulated extended period and directed that the appeal, if filed within that period with requisite pre-deposit, be decided on merits and not rejected on the ground of limitation. The Court also mandated that the Appellate Authority pass a reasoned order on merits. Ratio vs. Obiter: Ratio - In cases where a rectification affecting the assessee was passed without affording the mandatory hearing under Section 161, the Court may, in exercise of writ jurisdiction, allow an appeal to be filed within an extended period and direct that limitation will not be a bar; the appellate authority must decide the appeal on merits with a reasoned order. Obiter - Observations about the petitioner's insolvency status and operational constraints were recorded but did not form the basis of the relief granted. Conclusion: The Court permitted filing of the appeal within a specified extended timeline (with requisite pre-deposit) and directed that such appeal, if filed within time, be adjudicated on merits without being dismissed on limitation grounds; appellee to pass a reasoned order thereafter. Cross-References and Interrelations 1. Issue 1 (signature/DRC-07) and Issue 2 (personal hearing under Section 161) are distinct: the Court rejected invalidity based on lack of signature but independently found the rectification order vitiated for failure to afford hearing under Section 161 (see Issues 1 and 2 analyses). 2. Issue 3 (grant of writ-relief permitting appeal) flows from Issue 2: because the rectification order was set aside for breach of natural justice, equitable relief was fashioned to restore appellate remedy and prevent prejudice to the affected person (see Issue 2 conclusion and Issue 3 directions). Final Conclusions 1. Absence of the officer's signature on the order-in-original is not fatal where the order is accompanied by a DRC-07 containing the officer's name, designation and portal credentials; such objection is rejected. 2. A rectification under Section 161 that adversely affects a person mandates affording a personal hearing under the third proviso; failure to do so renders the rectification order invalid and necessitates reconsideration after hearing. 3. In the circumstances of a breach of Section 161, the High Court may, in exercise of writ jurisdiction, permit an appeal to be filed within an extended period and direct that it be decided on merits without dismissal on limitation grounds, with the appellate authority required to pass a reasoned order.