Facts of the Case

M/s. Aruni Stone Crusher was issued a notice dated 21.05.2025 by the Assistant Commissioner, CGST & Central Excise, Jajpur Division, calling upon it to pay GST on royalty paid for mineral extraction beyond the permissible limit for tax periods 2018-19 to 2022-23. This was followed by a Demand-cum-Show Cause Notice dated 26.06.2025 issued under Section 74 of the CGST/OGST Act, 2017. The petitioner filed a rectification application under Section 161 of the CGST Act on 26.08.2025 against the Demand-cum-Show Cause Notice, contending that if duly considered, the demand would stand drastically reduced or become nil. Instead, the authority issued intimations dated 02.09.2025 and 19.09.2025 fixing a personal hearing, without clarifying whether the rectification application would be taken up, prompting the petitioner to approach the Orissa High Court.

Issues Involved

  1. Whether a rectification application filed under Section 161 of the CGST Act against a Demand-cum-Show Cause Notice must be considered before the adjudicating authority proceeds further with the personal hearing.
  2. Whether GST is exigible on royalty paid for mineral extraction beyond the permissible limit, given the petitioner's claim of a drastically reduced or nil demand.
  3. Whether the Court should express any opinion on the merits of the underlying demand at this stage.

Petitioner's Arguments

  • The petitioner filed a rectification application under Section 161 of the CGST Act on 26.08.2025, well before the intimations for personal hearing were issued, specifically pointing out errors in the Demand-cum-Show Cause Notice.
  • If duly considered, the demand relating to GST on royalty for excess mineral extraction would be drastically reduced or rendered nil.
  • Proceeding straight to a personal hearing on the original demand without first disposing of the rectification application would render the statutory remedy under Section 161 illusory.

Respondent's Arguments

  • The intimations for personal hearing dated 02.09.2025 and 19.09.2025 were issued as part of the regular adjudication process following the Demand-cum-Show Cause Notice dated 26.06.2025.
  • It was open to the petitioner to raise the contents of its rectification application during the personal hearing itself, before the adjudicating authority.

Court Order / Findings

  • The Court noted that the petitioner's rectification application under Section 161 of the CGST Act, filed on 26.08.2025, remained un-adjudicated even as the authority proceeded to fix a personal hearing on the original Demand-cum-Show Cause Notice.
  • The Assistant Commissioner was directed to first examine the maintainability and merits of the Section 161 rectification application within two weeks, and only thereafter proceed further with the Demand-cum-Show Cause Notice, if warranted.
  • The writ petition was disposed of without expressing any opinion on the merits of the underlying demand relating to GST on royalty for mineral extraction beyond the permissible limit.

Important Clarification

  • Where a registered person files a rectification application under Section 161 of the CGST Act against a Demand-cum-Show Cause Notice, the adjudicating authority must consider that application on its own merits before proceeding further with the personal hearing on the original notice.
  • Fixing a personal hearing on the original demand while a pending rectification application remains unaddressed risks rendering the statutory remedy under Section 161 meaningless, and courts will intervene to enforce the correct sequence.

Sections Involved

  • Section 74 of the CGST/OGST Act, 2017 — demand and recovery on grounds of fraud/suppression.
  • Section 161 of the CGST Act, 2017 — rectification of errors apparent on the face of the record.

Decision – In Favour of

Disposed of with directions; a procedural safeguard was granted in favour of the petitioner to the extent that its rectification application must be considered first, without any final ruling on the underlying GST-on-royalty demand.

Case Details

Orissa High Court; WP(C) No.27456 of 2025; Coram: Chief Justice Harish Tandon and Justice Murahari Sri Raman; decided on 25.09.2025.

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