High Court Grants Liberty to File Statutory Appeal Beyond Limitation Subject to a Higher Pre-Deposit

Issue

Whether an assessee, who failed to respond to a Show Cause Notice (SCN) and had their rectification application rejected, should be granted the extraordinary liberty to file a statutory appeal under Section 107 of the CGST Act despite the expiry of the standard limitation period.

Facts

The Default: For the period 2020-21, the assessee failed to file a reply to the SCN, resulting in an adverse assessment order (ex-parte).
The Procedural Detour: Instead of filing a timely appeal, the assessee filed an application for rectification of the order. This application was subsequently rejected by the Department.
The Hurdle: By the time the rectification was rejected, the statutory time limit for filing an appeal under Section 107 (3 months + 1 month condonable delay) had already lapsed.
The Plea: The assessee approached the High Court via a writ petition, seeking permission to bypass the limitation barrier and present their case before the Appellate Authority.

Decision

Equitable Opportunity: The Court observed that while the assessee was procedurally negligent, they should not be denied a chance to contest the demand on its merits, especially given the consistent view taken by the Court in similar “failed reply” cases.
Extraordinary Liberty: Exercising its jurisdiction, the Court granted the petitioner liberty to file the statutory appeal notwithstanding the delay.
Enhanced Pre-Deposit: As a condition for this relief and to test the bona fides of the petitioner, the Court increased the mandatory pre-deposit requirement. Instead of the standard 10% required under Section 107, the Court ordered a deposit of 25% of the disputed tax amount.
Timeline: The petitioner was directed to file the appeal and make the deposit within 30 days.
Outcome: Ruled in favor of the assessee (conditional remand/liberty).

Key Takeaways

Rectification vs. Appeal: Filing a rectification application does not automatically “stop the clock” for an appeal. Taxpayers should ideally file an appeal pro-forma even while pursuing rectification to avoid becoming time-barred.
Cost of Delay: High Courts are often willing to restore appeal rights, but they usually impose a “price” in the form of a higher pre-deposit (25% in this case) to protect the interest of the Revenue.
Section 107 as a Remedy: The Appellate Authority remains the most effective forum for fact-finding. Once this liberty is granted by a Court, the Appellate Authority is bound to hear the case on its merits without dismissing it for delay.

HIGH COURT OF MADRAS

VIP Clothing Ltd.

Assistant Commissioner (ST) Gobichettipalayam Assessment Circle^*

C. Saravanan, J.

W. P. No. 1401 of 2026
WMP NOS. 1560 & 1561 OF 2026

JANUARY 27, 2026

M. Hariharan for the Petitioner. Mrs. P. Selvi, Govt. Adv. for the Respondent.

ORDER

1. Mrs.P.Selvi, learned Government Advocate takes notice for the Respondent.

2. This Writ Petition is being disposed of at the stage of admission itself with the consent of the learned counsel for the Petitioner and the learned Government Advocate for the Respondent.

3. The Petitioner is before this Court against the impugned Assessment Order dated 26.02.2025 in Form GST DRC – 07 passed for the financial year 2020-2021. The first impugned order was passed under Sec.73 of the respective GST Enactments together with notice issued under Sec.50(1) of respective GST Enactments.

4. Aggrieved by the impugned Assessment Order dated 26.02.2025, the petitioner filed an application on 27.02.2025 for rectification of the impugned order dated 26.02.2025, which came to be rejected on 19.11.2025. The operative portion of the impugned rejection order reads as follows :-

“Thus, any error apparent can be rectified under Sec.161. It is to be noted that an error apparent on the face of the record refers to mistakes easily identifiable without extensive interpretation, evident from the records themselves. These can include clerical mistakes, arithmetical errors, errors of law or errors of fact.

Thus, this order is not rectifiable under Sec.161 and this application of rectification is hereby rejected.”

5. The impugned order dated 26.02.2025 was preceded by a show cause notice in DRC-01 dated 22.11.2024, to which the Petitioner failed to file a reply and thus, suffered the impugned order dated 26.02.2025.

6. The learned counsel for petitioner submitted that the application for rectification was rejected. Therefore, liberty may be granted to the petitioner to file a statutory appeal against the impugned order dated 26.02.2025.

7. The learned Government Advocate appearing for respondent, however, submitted that the prayer sought by the petitioner cannot be entertained in view of the impugned order.

8. Considering both side submissions and following the consistent view taken by this Court under similar circumstances, the liberty is given to the petitioner to file an appeal before the Appellate Authority subject to the petitioner depositing 25% of disputed tax in cash or from the Petitioner’s Electronic Cash Register within a period of thirty (30) days from the date of receipt of a copy of this order.

9. In case, the petitioner files a statutory appeal within such time, the appellate authority is at liberty to proceed to pass a final order on merits without further reference to limitation. Subject to the Petitioner complying with the above stipulations, the attachment of the bank account of the Petitioner shall also stand automatically vacated.

10. It is made clear that bank attachment shall be lifted subject to the petitioner depositing 25% of the disputed tax as ordered above and the Petitioner not being in arrears of any other amount for any other tax period barring the amount demanded under the impugned Order.

11. In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the tax in accordance with law as if this Writ Petition was dismissed in limine today.

12. It is needless to state, before passing any such order, the Appellate Authority shall give due notice to the Petitioner.

13. This Writ Petition stands disposed of with the above observations. No costs. Connected Writ Miscellaneous Petitions are closed.