Summary: Navigating the appeal process under GST becomes complex when rectification applications are involved. Section 161 of the CGST Act, 2017 allows taxpayers to rectify errors in orders, giving authorities six months to pass rectified orders. However, Section 107(1) prescribes a three-month limitation period for filing appeals, extendable by one month, leading to conflicts when rectification applications are delayed. Judicial precedents, such as the Madras High Court ruling in SPK and Co. v. State Tax Officer, have clarified that the limitation period for filing appeals should commence from the rectification order date, not the original order. Despite this, delays by adjudicating authorities in addressing rectification applications remain a concern, potentially violating Section 161. The conundrum highlights ambiguities in GST laws and necessitates clearer guidelines to ensure taxpayers’ rights are not hindered.
The concept of limitation in litigation indeed presents several challenges. These include determining whether the time limit should be calculated from the date of the receipt of order or the next day of receipt, and whether the limitation period should be computed in terms of months or days. Under GST, a unique challenge has emerged regarding the limitation period for filing appeals when a rectification application is filed.
In this article, the Author intends to evaluate the time limit for filing of appeals in case where a rectification application has been filed against the order of the Adjudicating Authority by the aggrieved taxpayer.
With the growing digital intervention, GST litigation is no exception to its influence. The Revenue Department has widely adopted varied software for evaluating the differences in numerical values reported in the forms filed by the taxpayers based on which notices are being rolled out. After adjudication of such notices, orders are being passed where some factual submissions made by the taxpayer are ignored or not considered.
Against such incorrect orders, the assessee is provided an option under Section 161 of the CGST Act, 2017 for rectification of any errors apparent on the face of the order The term “errors” conventionally means a mistake or incorrect understanding. There could be three categories of errors:
a. Error in interpreting Law
b. Error in understanding facts
c. Clerical or arithmetical Errors
On any of the above category, when an order is identified to be erroneous, the aggrieved taxpayer can file a rectification application against which the Revenue Authority has 6 months time to pass a rectified order after providing an opportunity of hearing.
However, the statutory time limit for filing of appeals under Section 107(1) of the CGST Act, 2017 against the Adjudicating Authority’s order for the aggrieved taxpayer is only 3 months with a condonation period of additional 1 month.
The conflicting time limits have indeed caused significant challenges for taxpayers. When a rectification application is filed, the Adjudicating Authority often keeps it pending, citing a six-month period for passing orders. If the application is rejected after this period, the taxpayer’s appeal is often dismissed on the grounds that the statutory time limit prescribed under Section 107(1) [3 + 1 month] has expired. This lack of clarity in the GST legislation regarding these conflicting provisions has created considerable confusion and obstacles for taxpayers.
In order to evaluate the same, reading of Section 107(1) of the CGST Act, 2017 is crucial. Relevant extract is as below:
Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
The Appellate remedy provided in the above provision is against any order or decision passed under the GST enactment. In other words, even a rectification order passed by the Adjudicating Authority, either rejecting the rectification application filed or partially admitting the application would amount to an appealable order under Section 107(1) of the CGST Act, 2017.
However, Section 161 of the CGST Act, 2017 does not prescribe passing of a rectified order instead merely states that the error shall be rectified. In case the officer issues a corrigendum or any other document to rectify the error in the order, then the time limit to file appeal would still be a matter of dispute.
In the erstwhile regime, the Hon’ble Delhi Tribunal in the case of BHARAT EXPLOSIVES LTD. VERSUS COMMISSIONER OF C. EX., RAIPUR [2003 (159) E.L.T. 498 (TRI. – DEL.)] where a corrigendum to the order was served, the appeal filed within 60 days from the date of corrigendum order was consider to be within time limit and the appeal was directed to be admitted.
While a corrigendum and a rectification application under GST should not be considered the same, both ultimately result in a modification of the previously issued order. Therefore, the principles governing corrigendum should also be applicable to rectification applications.
Under GST, the Hon’ble Madras High Court in the case of SPK AND CO. V. STATE TAX OFFICER, RAMANATHAPURAM [2024 (25) CENTAX 410 (MAD.)] has held as follows:
If any rectification is made as prayed for, the same would get merged into the original order. Just because the rectification application has been rejected, the period of limitation to challenge the original assessment order cannot be said to begin from the date on which the original order was passed, it would only count from the date on which the order of rectification has been passed.
In the present case, the original order of assessment was made on 07.08.2024 and the order in rectification was made on 12.11.2024. Therefore, the period of limitation for challenging the order of assessment dated 07.08.2024 shall start ticking from the date of rejection of the rectification application i.e., from 12.11.2024. It is made clear that when the appeal is filed by the assessee as against the original order of assessment, the period of limitation shall be calculated from the date on which the rectification had been dismissed.
Considering the above arguments and the judicial precedents, it shall be arguable that the due date for filing of appeal against the rectification order shall be computed from the date of rectification order.
Caveat: It has been noticed in certain cases that the Adjudicating Authorities are not passing any orders against the rectification application filed by the aggrieved taxpayers, which is resulting in substantial delay in proceedings and a violation of Section 161 of the CGST Act, 2017 which prescribes a 6 months time limit for passing rectification orders.
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