ORIGINAL ORDER OBLITERATED BY RECTIFICATION ORDER; WRIT AGAINST ORIGINAL ORDER DISMISSED

ISSUE

Whether a writ petition challenging an Original Assessment Order is maintainable when the said order has already been modified/substituted by a subsequent Rectification Order passed under Section 161, which reversed the initial demand but confirmed a fresh demand on different grounds.

FACTS

Assessment Year: April 2019 to March 2020.
Timeline:
- 24.08.2024: Original assessment order passed confirming demand under Section 73/74.
- Rectification Application: The petitioner sought rectification of this original order.
- 18.03.2025: A Rectification Order was passed. Crucially, this order reversed the earlier demand but simultaneously confirmed a fresh tax demand of approx. Rs. 3.85 Crore on a completely different ground.
The Challenge: The petitioner filed a writ petition primarily challenging the original order dated 24.08.2024.
Rejection: A subsequent request (dated 24.03.2025) to rectify the new order was rejected on 31.03.2025.

DECISION

Doctrine of Merger/Obliteration: The High Court held that once the rectification order was passed on 18.03.2025, the original order dated 24.08.2024 stood obliterated (replaced) by the new order.
Wrong Target: A challenge to a non-existent (obliterated) order is without merit. The petitioner should have assailed the Rectification Order or the rejection of the subsequent request.
Verdict: The writ petition against the original order was dismissed. [In Favour of Revenue]

II. ADVERSE RECTIFICATION WITHOUT SPECIFIC SHOW CAUSE NOTICE IS INVALID

ISSUE

Whether an authority can pass a Rectification Order that adversely affects the assessee (by raising a fresh demand of Rs. 3.85 Crore) without issuing a specific notice proposing such enhancement, thereby violating the third proviso to Section 161.

FACTS

The Procedure: After the petitioner moved a rectification request, the Department issued notices on 05.12.2024 and 25.01.2025 calling for documents. The petitioner did not file a reply.
The Surprise: On 18.03.2025, the authority passed a rectification order. While it dropped the old demand, it confirmed a fresh demand of Rs. 3.85 Crore.
No Prior Notice: No separate proposal or Show Cause Notice (SCN) was issued specifically intimating the petitioner about this potential new adverse liability.
Petitioner’s Plea: The petitioner argued that this violated the principles of natural justice as mandated by the third proviso to Section 161.

DECISION

Mandatory Hearing: The Court held that for any adverse rectification (enhancement of liability), compliance with the third proviso to Section 161 is incumbent. This proviso requires that the assessee must be given an opportunity of being heard specifically on the adverse point.
Document Call != SCN: Merely calling for documents does not equate to a proper notice proposing an adverse demand.
Remedy: Acknowledging the petitioner’s non-cooperation earlier, the Court did not quash the demand entirely but remitted the matter. The impugned rectification order itself was treated as a Show Cause Notice, and the petitioner was directed to file a reply for fresh adjudication.
Verdict: [In Favour of Assessee / Matter Remanded]

KEY TAKEAWAYS

1. The “Adverse” Proviso:
Under Section 161, an officer can correct mistakes. However, if the correction results in enhancing liability or reducing input tax credit, they must issue a specific notice and grant a hearing. You cannot be surprised by a higher bill in a rectification proceeding without prior warning.

2. Challenge the Living Order:
In litigation, always attack the latest operative order. If an order has been rectified or revised, the old order effectively dies. Filing an appeal against the “dead” order is a procedural error that can get your case dismissed.

3. Rectification is a Double-Edged Sword:
When you apply for rectification to correct an error in your favor, the officer reviews the record. As seen here, this review can sometimes lead to them finding new liabilities. Be sure your record is clean before triggering Section 161.

HIGH COURT OF MADRAS

Tvl.Anand Transports

Assistant Commissioner (ST)^*

C. Saravanan, J.

W.P. Nos. 44477 and 44479 of 2025
W.M.P. Nos. 49609, 49610, 49613 and 49614 of 2025

NOVEMBER 18, 2025

B. Syed abdul Wakeel for the Petitioner. Mrs. P. Selvi for the Respondent.

ORDER

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

2. These Writ Petitions are being disposed of at the time of admission with the consent of the learned counsel for the Petitioner and learned Government Advocate for the Respondents.

3. In W.P.No.44477 of 2025, the Petitioner has challenged the impugned Order bearing Ref.No.ZD330824220770L dated 24.08.2024 passed under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017 by the 1^st Respondent for the Tax Period from April 2019 to March 2020.

4. W.P.No.44477 of 2025 has been filed by the Petitioner after the application filed by the Petitioner on 24.11.2024, to rectify the aforesaid impugned Order dated 24.08.2024 was partly answered in favour of the Petitioner vide Order dated 18.03.2025 and another application filed on 24.03.2025 came to be rejected vide Order dated 31.03.2025 by the 2^nd Respondent.

5. Learned counsel for the Petitioner submits that although the demand that was proposed in the Show Cause Notice in FORM DRC-01 dated 30.05.2024 was confirmed vide impugned Order dated 24.08.2024 was reversed by Order dated 18.03.2025, however, a fresh tax demand for a sum of Rs.3,85,35,356/- was confirmed under Section 161 of the respective GST enactments without due notice to the Petitioner.

6. It is submitted that it is in this background, the Petitioner had filed another application under Section 161 of the respective GST enactments on 24.03.2025 which has now been rejected on 31.03.2025 on a specific query as to how and why the Petitioner is challenging the Original Order dated 24.08.2024 which decision has been reversed vide Order dated 18.03.2025.

7. Learned counsel for the Petitioner would submit that the basis of the Order dated 18.03.2025 is the impugned Order dated 24.08.2024.

8. Learned Government Advocate for the Respondents submits that the Petitioner has slept over the rights as the Petitioner had failed to approach this Court against the Order dated 31.03.2025 immediately or by filing an appeal before the Appellate Authority within the time stipulated under Section 107 of the respective GST enactments.

9. Learned Government Advocate for the Respondents on the other hand would submit that these Writ Petitions are liable to be dismissed as the Petitioner has left over the statutory rights to file an appeal in terms of the decisions of the Hon’ble Supreme Court in Singh Enterprises v. CCE [2008] 12 STT 21 (SC)/(2008) 3 SCC 70 and in Commissioner of Customs and Central Excise v. Hongo India Private Limited. (2009) 5 SCC 791 and also in Asstt. Commissioner (CT), LTU v. Glaxo Smith Kline Consumer Health Care Ltd. G.S.T.L. 305 (SC)/2020 SCC Online SC 440.

10. Having considered the submissions made by the learned counsel for the Petitioner and the learned Government Advocate for the Respondents, this Court is of the view the challenge to the impugned Order dated 24.08.2024 passed under Section 73 of the respective GST enactments pursuant to the Show Cause Notice in FORM DRC-01 dated 30.05.2024 is without any merits as the said Order has been revised by Order dated 18.03.2025.

11. The entire demand that was confirmed vide impugned Order dated 24.08.2024 stands obliterated by Order dated 18.03.2025 and has been substituted with a fresh tax demand on a different ground altogether for a sum of Rs.3,85,35,356/-. Therefore, the Petitioner should have at best challenge the aforesaid Order pursuant to the rejection of application filed on 24.03.2025 to rectify the purported defect in the Order dated 18.03.2025 vide Order dated 31.03.2025.

12. A reading of the documents particularly Order dated 18.03.2025 passed pursuant to the application filed by the Petitioner on 24.11.2024 for rectification of impugned Order dated 24.08.2024 indicates that the Petitioner was issued with two Notices dated 05.12.2024 and 25.01.2025 to furnish the documents / informations. However, the Petitioner failed to respond to the same and it is in this background, Order dated 18.03.2025 has been passed.

13. Since the Order dated 18.03.2025 has been passed under Section 161 of the respective GST enactments, it was incumbent on the part of the Respondents to have complied with the requirements of 3^rd Proviso to Section 161 of the respective GST enactments as per which, where such rectification adversely affects any person, the Principles of Natural Justice shall be followed by the Authority carrying out such rectification.

14. In this case, there is only a part compliance of 3^rd Proviso to Section 161 of the respective GST enactments as the Petitioner has been only called upon to furnish certain documents vide Notices dated 05.12.2024 and 25.01.2025 which were not responded by the Petitioner.

15. Therefore, before confirming the tax demand vide Order dated 18.03.2025 for a sum of Rs.3,85,35,356/-, a proper Notice should have been issued and merely asking the Petitioner to furnish certain documents was not sufficient. At the same time, the Petitioner has also not been vigilant in either approaching this Court earlier or by filing an appeal before the Appellate Authority instead the Petitioner filed the application for rectification of order dated 24.03.2025 which has been rejected by Order dated 31.03.2025.

16. Considering the overall facts and circumstances of the case and considering the fact that the Petitioner has also not cooperated with the Respondents, to balance the interest of the Petitioner and the Respondents, this case is remitted back to the 2^nd Respondent to pass a fresh order in lieu of Order dated 18.03.2025 passed under Section 161 of the respective GST enactments insofar as it confirms the tax demand for a sum of Rs.3,85,35,356/-.

17. The impugned Order dated 18.03.2025 shall be treated as a Show Cause Notice for the purpose of remand proceedings.

18. Since the Petitioner has approached this Court only on 03.11.2025, the Petitioner is directed to deposit 10% of the disputed tax in cash 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.

19. In case the Petitioner complies with the above stipulation, the 2^nd Respondent shall proceed to pass a final order on merits and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such reply/pre-deposit. Subject to the Petitioner complying with the above stipulation, the attachment of the bank account of the Petitioner shall also stand automatically vacated.

20. It is made clear that bank attachment shall be lifted subject to the deposit of 10% of the disputed tax as ordered above and no other amount is in arrears barring the amount demanded under the impugned Order.

21. In case the Petitioner fails to comply with the above stipulation, the 2^nd 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.

22. Needless to state, before passing any such order, the 2^nd Respondent shall give due notice to the Petitioner.

23. In view of the above W.P.No.44477 of 2025 is dismissed and W.P.No.44479 of 2025 is disposed of. No costs. Connected Writ Miscellaneous Petitions are closed.