HC Directs Authority to First Decide on SCN Rectification Before Adjudication.

Issue

When a taxpayer files an application under Section 161 of the CGST Act to rectify an alleged error in a Show Cause Notice (SCN), is the adjudicating authority obligated to first consider and dispose of that rectification application before proceeding with the hearing and adjudication of the SCN itself?

Facts

The petitioner received a Demand-cum-Show Cause Notice (SCN) under Section 74, proposing to levy GST on royalty payments.
Believing the SCN contained a mistake apparent on the face of the record, the petitioner filed a formal application for rectification under Section 161 of the CGST Act.
Subsequently, the department issued intimations for a personal hearing related to the original SCN, but these notices made no mention of the pending rectification application.
Fearing that their request for rectification was being ignored and they would be forced to argue against a potentially flawed notice, the petitioner filed a writ petition in the High Court.

Decision

The High Court, without expressing any opinion on the merits of the tax dispute, remanded the matter with specific procedural directions.
It directed the Assistant Commissioner to first consider the petitioner’s rectification application. This process involves two steps:
1. Determine if the application is maintainable under Section 161.
2. If it is maintainable, examine and decide on the merits of the grievance raised.
A strict timeline was imposed: the authority was directed to decide the rectification application within two weeks.
The court clarified that only after this decision is made can the authority proceed further with the adjudication of the SCN (in its original or rectified form).

Key Takeaways

Right to a Correct Notice: A taxpayer has the right to be adjudicated based on a factually and legally correct Show Cause Notice. The rectification provision under Section 161 can be invoked to correct errors even in an SCN.
Procedural Fairness: When a taxpayer raises a preliminary objection about the correctness of the foundational notice (the SCN) through a statutory process, the principles of natural justice demand that this objection be addressed first.
Hierarchy of Actions: The ruling establishes a procedural hierarchy: a pending rectification application concerning an SCN must be disposed of before the authority proceeds with the adjudication based on that SCN.
Judicial Intervention for Due Process: This case demonstrates that the High Court can intervene under its writ jurisdiction not to decide the tax liability itself, but to ensure that the tax authorities follow the correct legal procedure and respect the taxpayer’s statutory rights.

HIGH COURT OF ORISSA

Aruni Stone Crusher

Superintendent Central GST and Central Excise

Harish Tandon, CJ.
and M.S. Raman, J.

WP(C) No.27456 of 2025

SEPTEMBER 25, 2025

Jagabandhu Sahoo, Sr. Adv. and Ms. Kajal Sahoo, Adv. for the Petitioner. Bismay Anand Prusty, Sr. Standing Counsel for the Respondent.

ORDER

1. By way of filing this writ petition, the petitioner being aggrieved by intimations dated 02.09.2025 and 19.09.2025 issued by the Superintendent, Central GST and Central Excise Jajpur Division, Jajpur Road instructing to appear before the Assistant Commissioner, Jajpur Division on the date specified therein through virtual mode affording personal hearing in connection Demand-cum-Show Cause Notice.

2. Mr. Jagabandhu Sahoo, learned Senior Counsel along with Ms. Kajal Sahoo, learned counsel for the petitioner submitted that a notice dated 21.05.2025 was served with a request to pay GST under Section 74 of the Central Goods and Services Tax Act, 2017/the Odisha Goods and Services Tax Act, 2017 (Collectively, “GST Act”) on royalty relating to permissible limit and extraction of mineral beyond the permissible quantity pertaining to tax periods from 2018-19 to 2022-23. However, against Demand-cum-Show Cause Notice dated 26.06.2025 issued by the Assistant Commissioner, CGST & Central Excise, Jajpur Division, Jajpur Road indicating deposit of demand raised under Section 74 of the GST Act, an application under Section 161 of the GST Act was filed before the authority concerned on 26.08.2025 for rectification of Demand-cum-Show Cause Notice dated 26.06.2025. It is vehemently contended by learned Senior Counsel that the authority concerned instead of considering the application under Section 161 in its right earnest the intimations dated 02.09.2025 and 19.09.2025 have been issued to the petitioner insisting for personal hearing before the Assistant Commissioner, GST & Central Excise, Jajpur Division in connection with the Show Cause Notice C.No.GEXCOM/AE/INV/GST/599/2024-CGST-RANGE-5-DIV-JJPR-COMMRTE-BBSR/202, dated 26.06.2025. It is submitted that if the application for rectification is considered, the amount of demand as reflected in the Demand-cum-Show Cause Notice would drastically be reduced or even come down to nil.

3. Sri Bismay Anand Prusty, learned Senior Standing Counsel submitted that the document enclosed does not reveal that the petitioner has responded to the notice dated 21.05.2025 (Annexure-1). On receiving Demand-cum-Show Cause Notice dated 26.06.2025, it appears that the petitioner has filed application for rectification of said Notice. Since the authority concerned has issued intimation for personal hearing in connection with the Demand-cum-Show Cause Notice, no fault can be attributed to the authority as in course of proceeding with the matter, all the contentions raised in the application for rectification can be considered by the authority.

4. Heard learned counsel for the parties.

5. Perused the record. It is apparent from record vide Annexure-3 that Office of the Assistant Commissioner, CGST and Central Excise, Jajpur Division, Jajpur Road received the application for rectification of Demand-cum-Show Cause Notice dated 26.06.2025 and the intimations for personal hearing do not reveal that the authority concerned would consider the said application along with Demand-cum-Show Cause Notice.

6. In such view of the matter, it is considered prudent to direct the Assistant Commissioner, GST & Central Excise, Jajpur Division to consider whether application for rectification of Demand-cum-Show Cause Notice, as stated to have been filed by the petitioner, is maintainable in terms of Section 161 of the GST Act and in the event, such a petition is found to be entertained in terms of language employed in Section 161, the grievance of the petitioner as mentioned in the said application would be considered on its own merits.

7. Considering submissions, it is directed that the Assistant Commissioner GST & Central Excise, Jajpur Division shall do well to consider the application for rectification within a period of two weeks from the date of receipt of certified copy/down loaded copy of this order to be submitted by the petitioner.

8. It is made clear that if occasion so arises after consideration of said application for rectification, said authority may proceed further in connection with Demand-cum-Show Cause Notice dated 26.06.2025.

9. Without expressing any opinion on the merits of the matter, the writ petition is disposed of with the aforesaid observations and directions. Pending Interlocutory Application(s), if any, shall stand disposed of.