In the last 9 months or so, there have seen tremendous number of notices and demand orders being passed, considering the time limit provided under Section 73 of the CGST Act, 2017. The spike in the number of GST notices reminds the authors of another painful spike seen in the year 2020, the unforgettable ‘COVID cases’ graph.
It possibly feels like the GST Department has suddenly realized that majority of the taxpayers could have defaulted payment of GST, as the first 5 years were relatively peaceful period for the taxpayers.
Considering the number of cases being handled by the tax authorities at a given point of time, it would be quite interesting to evaluate the time available for the tax authorities for completion of each of the assessments. At times, we also wonder whether it is humanly possible for an authority to pass hundreds of orders in a single day!!
As a result, it could be common to come across various demand orders, where the tax authorities could have either partly or wholly ignored the submissions of the taxpayer. Also, the chances of arithmetical and manual errors in the orders cannot be ruled out (copy-paste errors in the orders are not un-common).
What could be the fate of the taxpayer in cases where the demand has been confirmed? Normally, the standard approach would be either file an appeal before the Appellate Authority or follow the current trend of ‘WRIT Petition’ before the High Court. No wonder why there are so many cases pending before our Courts!
Is there an alternative third option, which can be looked at? The GST law provides a special provision, which allows for rectification of orders, to rectify any error in the order which is apparent on the face of the said order. The relevant provision covering rectification, is as follows
161. 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
The most important phrase in the aforesaid provision is ‘error which is apparent on the face of record’, as it is the sole ground on which the rectification is allowed. Unfortunately, the GST law has not provided any explanation or clarity as to what would be considered as an ‘error which is apparent on the face of record’. However, an error conventionally means a mistake or incorrect understanding. There could be various categories of errors, namely:
1. Error in interpreting Law (including those where the settled and binding judicial view has not been considered)
2. Error in facts (including those where facts are not considered wholly or partly)
3. Clerical or arithmetical Errors
4. Other Errors
For errors in interpreting law (where binding judicial view does not exist) and those where factual submissions of the taxpayer were incomplete, a rectification application would not be entertained, and certainly, an appeal has to be preferred unless the same is a literal interpretation that the Authority had failed to consider.
There are multiple precedents by the Hon’ble Supreme Court wherein it was held that power to review and rectify may not be exercised on the ground that decision was erroneous on merits, as the same would be the domain of the Court of appeal. Power of review is limited.
A similar phrase, ‘mistake apparent from record’ has been explained by the Hon’ble Supreme Court as far back as in the year 1971 in the case of T.S. Balaram, Income-tax Officer, Company Circle IV, Bombay v. Volkart Brothers & Ors. [(1971) 82 ITR 50], wherein the Court held that a debatable point of law cannot constitute a mistake apparent from the record on which two opinions are conceivable, it cannot be said to be an error apparent on the face of the record. The observation of the Supreme Court in case of T.S. Balaram, Income-tax Officer, Company Circle IV, Bombay v. Volkart Brothers & Ors. (supra) is worth noting which reads as follows
“A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, (1960) 1 SCR 890, this court while spelling out the scope of the power of a High Court under article 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record”
The Hon’ble Supreme Court in the case of Saurashtra Kutch Stock Exchange Limited [2008 (230) E.L.T. 385 (S.C.)] held that “an error cannot be said to be apparent on the facts of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on the mere looking and does not need long drawn-out process of reasoning on points where there may be conceivably be two opinions.
Even under GST, in the case ofVISHAKA EXPORTS Versus ASSISTANT COMMISSIONER (ST) (FAC), TIRUPPUR [2023 (71) G.S.T.L. 383 (Mad.)], the Court had held as follows
A careful perusal of this communication which according to writ petitioner is a rectification application, leaves this Court with the considered view that it does not qualify qua errors apparent on the face of the record as it talks about output mismatch qua Forms GSTR-3B and GSTR-1 and credit notes not reversed in GSTR-3B. This may well be grounds of appeal if the writ petitioner chooses to file a statutory appeal under Section 107 of TN-G&ST Act but it cannot be gainsaid that it is an error apparent on the face of record. To be noted, the expression ‘errors apparent on the face of record’ has been repeatedly explained by this Court to be errors which are so obvious and so palpable (tangible if one may say so) that no inferential process is required or no inferential process need to be applied to detect the error.
However, it does not lead to the conclusion that only clerical and manual arithmetical errors would be covered within the scope of rectification. The 2nd proviso to Section 161 of the CGST Act, 2017 provides that the time limit of 6 months would not be applicable for correction of a clerical or arithmetical error. So, it can be understood that errors include clerical or arithmetical errors, in addition to other factual or legal errors (literal interpretation) which can be inferred without further evaluation. The Authority may commit an error or omission while passing an order and the ibid provision engulfs both the scenarios and a rectification can be preferred.
Iin the case of HONDA SIEL POWER PRODUCTS LTD. Versus COMMR. OF INCOME TAX, DELHI [2008 (9) S.T.R. 117 (S.C.)], the Hon’ble Supreme Court had held as follows
13. “Rule of precedent” is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal’s mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to the Tribunal that the judgment of the coordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal’s mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.
There are also various scenarios, where the Adjudicating Authority does not follow the judicial discipline or confirm the demand without any evaluation of the submissions made by the taxpayer. In such cases, whether the remedy of rectification can be sought for by the taxpayer, needs evaluation. The Courts have time and again emphasised the point that no ground of the taxpayer should be ignored and it is important to follow judicial discipline, to ensure that justice is served.
The Kerala High Court in the case of KOLUTHARA EXPORTS LTD. Versus UNION OF INDIA [2022 (57) G.S.T.L. 112 (Ker.)] had held that “When binding decisions are pointed out and the same are not relied upon by the authority to render its decision, it will tantamount to an error apparent on the face of the record, as held in Honda Siel Power Products Ltd. v. Commissioner of Income-tax, Delhi [2008 (221) E.L.T. 11 (S.C.)]”
In the case of S. Nagaraj & Ors. v. State of Karnataka, 1993 Supp (4) SCC, it has been stated that
“Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to anyone. Rule of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order. Difference lies in the nature of mistake and scope of rectification, depending on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustice. It is either statutory or inherent. The latter is available where the mistake is of the Court. In Administrative Law, the scope is still wider. Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order”.
The Hon’ble Supreme Court in the case of ASSTT. COMMR., INCOME TAX, RAJKOT Versus SAURASHTRA KUTCH STOCK EXCHANGE LTD [2008 (230) E.L.T. 385 (S.C.)]
40. The core issue, therefore, is whether non-consideration of a decision of Jurisdictional Court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a “mistake apparent from the record”? In our opinion, both – the Tribunal and the High Court – were right in holding that such a mistake can be said to be a “mistake apparent from the record” which could be rectified under Section 254(2).
Reference is also drawn to the following rulings of the Tribunal, which have evaluated the coverage of the term ‘error apparent on the face of the record’, when the submissions made on record are not considered while passing an order against the taxpayer.
- SCHENCK ROTEC INDIA LTD. Versus COMMISSIONER OF CUS., C. EX. & S.T., NOIDA [2017 (3) G.S.T.L. 425 (Tri. – All.)]
5. Having considered the rival contentions, I find that the ground, as aforementioned, have not been considered by this Tribunal nor the judgment of the Apex Court relied on by the appellant, nor there is any finding distinguishing the same. Thus there is in error apparent on the face of record. Accordingly, the Final Order No. A/50225/-SM(BR), dated 12-2-2016, is hereby recalled,
- GTL INFRASTRUCTURE LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI [2016 (45) S.T.R. 389 (Tri. – Mumbai)]
In the instant case the written submissions available on record and filed before the Final Order, clearly show beyond any doubt that the above legal issue though raised and argued on behalf of the appellant, was not considered and no findings were recorded thereon. Such error apparent from record needs to be rectified.
In summary, the authors are of the humble opinion that the scope of rectification under GST, is not restricted to mere clerical or arithmetical errors. The same would also extend to cover scenarios where the Adjudicating Authority has grossly failed to consider the submissions/facts placed on record by the taxpayer or where the Authority has ignored the binding judicial view on the said matter. In all such cases, where the option of rectification appears to be available as a ‘Clear Choice’, the said route can be considered, instead of getting into the mode of appeal or WRIT before the Courts.
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