Facts of the Case:

In the case, the petitioner challenged an order passed under Section 73 for the tax period April 2019 to March 2020. The said order had confirmed the demand proposed in a Show Cause Notice issued in Form DRC-01 dated 30.05.2024. Subsequently, the petitioner filed an application seeking rectification of the Section 73 order. This application was partly allowed by the respondent authority by an order dated 18.03.2025, whereby the original demand confirmed under Section 73 was completely reversed. However, in the same rectification order passed under Section 161 of the GST Act, a fresh tax demand of ₹3,85,35,356/- was confirmed against the petitioner on a different basis, without issuance of any independent show cause notice.

Aggrieved by the confirmation of fresh demand, the petitioner filed another rectification application under Section 161, which was rejected on 31.03.2025. The petitioner thereafter approached the High Court by way of writ petitions. The Revenue opposed the writ petitions on the ground of availability of an alternative appellate remedy under Section 107 and delay on the part of the petitioner.

Issue:

Whether a fresh tax demand adversely affecting the assessee can be confirmed through a rectification order under Section 161 of the GST Act without issuing a proper show cause notice and without full compliance with the principles of natural justice, as mandated by the third proviso to Section 161.

Held That:

The Court observed that confirmation of a substantial tax demand through a rectification order without issuing a proper notice explaining the basis of demand was procedurally flawed. At the same time, the Court noted that the petitioner was also not vigilant and had failed to either respond to notices or avail the statutory appellate remedy in time.

The Court found substance in the petitioner’s grievance against the rectification order dated 18.03.2025 insofar as it confirmed a fresh tax demand of ₹3,85,35,356/-. The Court held that although the petitioner had been called upon to furnish certain documents by notices dated 05.12.2024 and 25.01.2025, mere calling for documents does not satisfy the requirement of the third proviso to Section 161, which mandates adherence to the principles of natural justice where rectification adversely affects any person.

The High Court held that the original order dated 24.08.2024 passed under Section 73 stood completely obliterated and substituted by the rectification order dated 18.03.2025. Therefore, the challenge to the original Section 73 order had become infructuous and devoid of merits.

The Court remitted the matter back to the second respondent, directing that the rectification order dated 18.03.2025 shall be treated as a show cause notice. The petitioner was directed to deposit 10% of the disputed tax within 30 days, failing which the authorities were given liberty to proceed with recovery.

Case Name: Tvl. Anand Transports, Represented by its Proprietor Mahesh Versus The Assistant Commissioner (ST), The State Tax Officer (FAC), Chennai dated 18.11.2025

To read the complete judgement 2025 Taxo.online 3116