Facts of the Case

The petitioner, Om Sai Security, Rourkela, had earlier succeeded in its first appeal (No.AD210422007821R dated 28.04.2022) before the Joint Commissioner of CT & GST (Appeal), Sundargarh Territorial Range, which by order dated 27.02.2023 reduced a demand of Rs.7,19,966/- to nil. This appellate order fully favoured the petitioner and, having gone unchallenged by the department, ought ordinarily to have attained finality. However, the very same authority subsequently passed an order dated 06.05.2023, purportedly in the name of "rectification" of the appeal order under Section 161 of the OGST Act, which reversed the earlier favourable order and disallowed the appeal — without affording the petitioner any opportunity of hearing, and without recording any fresh reasoning to justify why the earlier, considered finding of nil demand was being overturned.

Issues Involved

  1. Whether an appellate authority can, in the guise of rectification under Section 161, review and reverse its own earlier order allowing an appeal, without affording an opportunity of hearing to the affected party.
  2. Whether the mandatory procedural safeguard (the third proviso to Section 161, requiring an opportunity of hearing where rectification is adverse to a party) was complied with.

Petitioner's Arguments

  • The petitioner contended that the order dated 06.05.2023, though styled as a rectification of the appeal order dated 27.02.2023, in substance disallowed the appeal without affording any opportunity of hearing, in breach of the third proviso to Section 161 of the OGST Act, and was therefore unsustainable.

Respondent's Arguments

  • On instructions received pursuant to the Court's earlier order dated 04.08.2023, the Standing Counsel for the CT & GST Department admitted that the impugned order dated 06.05.2023 did not comply with the requirement of the third proviso to Section 161 of the OGST Act and that no opportunity of hearing had been given to the petitioner.

Court Order / Findings

  • The Court held that the Joint Commissioner, in the name of rectifying his own appeal order, had passed an order reversing the earlier decision without complying with the principle of natural justice mandated by the third proviso to Section 161 of the OGST Act, and that reviewing one's own order in this manner, without any rhyme or reason and without hearing, is not permissible under law.
  • The order dated 06.05.2023 was accordingly held unsustainable and was quashed.
  • The writ petition was allowed.

Important Clarification

An appellate authority cannot use the rectification power under Section 161 of the GST Act as a backdoor route to review and reverse its own earlier appellate order to the detriment of the assessee, particularly without affording the mandatory opportunity of hearing required whenever a rectification adversely affects a party. Such an order amounts to an impermissible review disguised as rectification, and is liable to be quashed. Rectification is meant to correct genuine errors apparent on the face of the record — it is not a mechanism for an authority to have a second, unfettered opportunity to reconsider and overturn a decision it has already taken after due application of mind.

Sections Involved

  • Section 161, OGST Act, 2017 — empowers rectification of errors apparent on the face of the record, subject to the proviso requiring an opportunity of hearing where the rectification is prejudicial to a party.
  • Section 107, OGST Act, 2017 — the appeal provision under which the petitioner's original, successful appeal was decided.

Decision – In Favour of

The decision is in favour of the Assessee. The impermissible "rectification" order was quashed, restoring the earlier appellate order in the petitioner's favour.

Case Details

Court: High Court of Orissa at Cuttack
Case No.: W.P.(C) No.23182 of 2023
Coram: Dr. Justice B. R. Sarangi and Justice Murahari Sri Raman
Date of Order: 16.08.2023

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