The time a taxpayer spends pursuing a rectification application must be excluded when calculating the time limit for filing an appeal against the original order.

The time a taxpayer spends pursuing a rectification application must be excluded when calculating the time limit for filing an appeal against the original order.

Issue

Should the time period during which a taxpayer is bona fide pursuing a rectification application be excluded when computing the statutory limitation period for filing an appeal against the original order that is sought to be rectified?

Facts

• After receiving an adverse order, the assessee filed a rectification application under Section 161 of the CGST Act to have certain errors corrected.
• While this application was pending, the statutory time limit for filing an appeal against the original order expired.
• When the assessee later filed an appeal, the appellate authority rejected it as time-barred.
• The revenue department argued that the assessee should have filed the appeal simultaneously with the rectification application and that seeking rectification does not automatically extend the time for an appeal.

Decision

The High Court ruled in favour of the assessee.

• It held that the time spent by the assessee in genuinely pursuing the remedy of a rectification application must be excluded from the computation of the limitation period for an appeal.
• The court reasoned that since the outcome of the rectification could potentially alter or even nullify the original order, the time limit to appeal should logically commence only after the rectification proceedings have been concluded.
• The court set aside the appellate order that had dismissed the appeal on grounds of delay and remanded the matter back to the Appellate Authority for a fresh decision on its merits.

Key Takeways

1. Rectification is a Valid First Step: A taxpayer has a statutory right to first seek the correction of an apparent error through a rectification application. They should not be penalized for choosing this simpler and more direct remedy before resorting to a full-fledged appeal.
2. Bona Fide Action is Key: The court emphasized that this exclusion of time applies when the taxpayer is acting in good faith (bona fide). A taxpayer cannot use a frivolous rectification application as a tool to simply extend the time for filing an appeal.
3. Preventing Procedural Traps: The court’s decision prevents a procedural trap where a taxpayer might lose their right to appeal while waiting for a decision on their rectification request. It aligns the procedural timelines with the logical sequence of legal remedies.

There is no violation of natural justice if a show-cause notice (SCN) is served via email and the taxpayer is proven to be aware of the proceedings, even if the SCN was not uploaded to the GST portal.

Issue

Does the failure to upload a show-cause notice (SCN) to the GST portal constitute a violation of the principles of natural justice if the notice was successfully served on the taxpayer through another valid mode, such as email, and the taxpayer was otherwise aware of the ongoing proceedings?

Facts

• The assessee was accused of large-scale fraudulent availment of Input Tax Credit (ITC).
• A show-cause notice (SCN) was duly served on the assessee via email. The department’s analysis also established that the assessee was aware of the investigation and the proceedings that were being conducted against them.
• The assessee’s main defense in a writ petition was that there was a violation of natural justice because the SCN and the hearing notices were not uploaded to the GST portal. They claimed this deprived them of an opportunity to respond.
• The assessee filed a writ petition against the final order, but did so after the statutory time limit for filing an appeal had already expired.

Decision

The High Court ruled in favour of the revenue.

• It held that since the assessee had received the SCN through a valid mode of service (email) and had full knowledge of the ongoing proceedings, there was no violation of the principles of natural justice.
• The court found that the writ petition was not maintainable as it was filed late and a statutory appeal remedy was available.
• However, taking a lenient view, the court granted the assessee the liberty to file a statutory appeal against the order, despite the delay.

Key Takeways

1. Multiple Modes of Service are Valid: The GST law provides for several valid modes of serving a notice, including email and uploading to the portal. Effective service through any one of these valid modes is sufficient to meet the legal requirement.
2. Awareness of Proceedings is a Crucial Factor: A taxpayer’s claim of a natural justice violation is significantly weakened if the department can prove that the taxpayer was, in fact, aware of the proceedings. The purpose of a notice is to make the person aware, and if that purpose is achieved, a procedural argument about the mode of service will likely fail.
3. The Portal is Not the Only Method: While the GST portal is the primary interface, it is not the sole and exclusive method for the service of notices. Other methods, like email and registered post, are equally valid in the eyes of the law.
4. Exhaust Your Alternate Remedies: The court’s decision to relegate the assessee to the appellate remedy, even while granting them liberty to file a late appeal, is a strong indicator that the courts will almost always insist on the taxpayer exhausting the statutory appeal mechanism before they will entertain a writ petition on such issues.