High Court Sets Aside Rejection of Rectification; Duplication of ITC Demand Must Be Examined

Issue

Whether the rejection of a rectification application under Section 161 of the CGST Act is legally sustainable when the petitioner demonstrates a prima facie duplication of a tax demand (excess ITC) that was already covered in a previous adjudication order for the same tax period.

Facts

Tax Period: The dispute covered the composite period from 2017-2018 to 2021-2022.
First Order: The department passed an adjudication order on 03.02.2025. This order specifically dealt with the issue of “excess Input Tax Credit (ITC) availed” (mismatch between GSTR-3B and GSTR-2A) and quantified a demand of approximately Rs. 1.08 crores.
Second Order: Subsequently, on 27.02.2025, the department passed another order under Section 73 for the same composite period. This second order included various issues but also reflected a similar figure for the same excess ITC issue, effectively duplicating the demand.
Rectification Application: The petitioner filed an application under Section 161 on 27.05.2025, specifically pointing out this duplication of the ITC demand.
Rejection: The Respondent rejected this rectification application vide an order dated 26.08.2025.
Challenge: The petitioner filed a writ petition challenging both the second assessment order (27.02.2025) and the rejection of the rectification (26.08.2025).

Decision

The Madras High Court set aside the rejection order dated 26.08.2025.
Prima Facie Duplication: The Court observed that a comparison of the two orders (dated 03.02.2025 and 27.02.2025) revealed a prima facie duplication of the demand regarding excess ITC vis-a-vis GSTR-2A.
Duty to Rectify: The Court held that when a specific request pointing out such a factual error (duplication) is made, the authority is bound to examine it under Section 161 (Rectification of errors apparent on the face of record). Summarily rejecting such a claim is improper.
Remand: The matter was remitted back to the respondent for a fresh consideration of the rectification application in accordance with the law.

Key Takeaways

Duplication is an “Error Apparent”: A demand raised twice for the same tax liability in different orders constitutes an “error apparent on the face of the record,” which fits squarely within the scope of Section 161.
Adjudicating Authority’s Duty: Tax officers cannot dismiss rectification applications mechanically. If a taxpayer presents evidence of a double demand, the officer must verify the records and correct the mistake to prevent unjust enrichment of the revenue.
Rectification vs. Appeal: For clear factual errors like duplication, Section 161 is the appropriate and faster remedy. Taxpayers should not be forced to file a statutory appeal (and pay pre-deposit) merely to correct a clerical repetition of a demand.
Scope of Remand: The High Court focused on ensuring the process of rectification was conducted correctly, rather than adjudicating the demand itself, highlighting the importance of procedural correctness.

HIGH COURT OF MADRAS

Nabati Food (India) (P.) Ltd.

Assistant Commissioner of Central Tax & Central Excise, Chennai^*

C.Saravanan, J.

W.P. No. 42823 of 2025
W.M.P. Nos. 47879 & 47880 of 2025

NOVEMBER 6, 2025

N.V.Balaji for the Petitioner. Rajnish Pathiyil, Sr. Standing Counsel for the Respondent.

ORDER

1. The Writ Petition is disposed of at the time of admission after hearing the learned counsel for the petitioner and the learned counsel for the respondent.

2. In this Writ Petition, the petitioner has challenged the impugned order dated 27.02.2025 passed under Section 73 of the respective GST Enactment, and the subsequent order dated 26.08.2025, whereby the petitioner’s application dated 27.05.2025 seeking rectification of the said order was rejected.

3. The learned counsel for the petitioner submits that, for the very same period, an earlier order had been passed on 03.02.2025. The said proceedings pertained to a composite period covering the assessment years 2017-2018 to 2021-2022.

4. It is further submitted that the amount forming the subject matter of the order dated 03.02.2025 also forms part of the impugned order dated 27.02.2025. Hence, the petitioner filed an application for rectification of the order dated 27.02.2025, which came to be rejected by the subsequent order dated 26.08.2025.

5. The specific case of the petitioner is that, in the order dated 03.02.2025, the only issue pertained to excess Input Tax Credit (ITC) availed in GSTR-3B as compared to GSTR-2A, for a sum of Rs. 1,08,39,873/-.

6. It is further submitted that, in the impugned proceedings, the same amount has been reflected as Rs. 1,08,28,252/-, apart from certain other issues.

7. The learned counsel for the petitioner contends that the impugned orders are arbitrary and have not taken into account the fact that there is a duplication of demand between the order dated 03.02.2025 and the impugned order dated 27.02.2025.

8. On the other hand, the learned counsel for the respondent submits that the impugned order dated 27.02.2025 is a detailed order and does not warrant any rectification under Section 161 of the respective GST Enactment. It is therefore submitted that the rectification application was rightly rejected by order dated 26.08.2025, and that the petitioner is at liberty to work out his remedy before the Appellate Authority, namely the Additional Joint Commissioner (No. 38, Nungambakkam, Chennai).

9. Having considered the submissions of both learned counsel and on perusal of the order dated 03.02.2025 passed for the tax period 2017-2018 to 2021-2022, it prima facie appears that there is a duplication of demand insofar as the excess ITC availed, when compared with the auto-populated input data under GSTR-2A, is concerned. This aspect ought to have been examined by the respondent under Section 161 of the respective GST Enactment, particularly when a specific request to that effect had been made by the petitioner on 27.05.2025.

10. Under these circumstances, the impugned order dated 26.08.2025 is set aside, and the matter is remitted back to the respondent authority to reconsider the issue afresh in accordance with law. If, upon such reconsideration, an adverse order is passed against the petitioner, the petitioner shall be entitled to file a consolidated appeal within 30 days from the date of receipt of a copy of such order.

11. In view of the above, the following directions are issued:

(i)

The petitioner’s application for rectification dated 27.05.2025 shall be considered and disposed of within a period of 30 days from the date of receipt of a copy of this order.

(ii)

The petitioner shall thereafter be at liberty to file an appeal before the Appellate Authority, both against the demand confirmed by order dated 27.02.2025, and in respect of the other issues if the rectification application is rejected.

12. With the above directions, the Writ Petition stands disposed of. No costs. Consequently, the connected W.M.Ps. are closed.