Rectification application pending for ITC demand, writ petition directed to hearing in rectification proceedings.

Rectification application pending for ITC demand, writ petition directed to hearing in rectification proceedings.

Issue:

When an assessee files a writ petition challenging a demand order for alleged excess Input Tax Credit (ITC) availment, and it is discovered during the writ proceedings that a rectification application under Section 161 of the CGST Act is already pending regarding the same order, what is the appropriate course of action for the High Court?

Facts:

The assessee filed a writ petition under Article 226 of the Constitution of India, seeking to quash an order that confirmed a demand of ₹1,60,35,990 for alleged excess availment of Input Tax Credit. The assessee argued that their reply to the Show Cause Notice was not adequately considered by the adjudicating authority. During the proceedings of the writ petition, the court discovered that an application for rectification of mistakes, filed by the assessee under Section 161 of the CGST Act, was already pending before the appropriate authority concerning the same demand order.

Decision:

The writ petition was disposed of, partly in favor of the assessee. Instead of adjudicating the writ petition on its merits, the court directed that the appropriate remedy, given the pending rectification application, was to ensure a personal hearing in those rectification proceedings. The court directed the department to communicate the hearing date for the rectification application through the portal and to the assessee’s counsel. All rights and remedies of the assessee concerning both the impugned order and the rectification order were left open, allowing the assessee to pursue further legal recourse if dissatisfied with the outcome of the rectification proceedings.

Key Takeaways:

• The existence of a pending rectification application under Section 161 of the CGST Act is a crucial factor for courts considering writ petitions challenging demand orders.
• Where a rectification application is pending, courts generally prefer to direct the authorities to conduct a personal hearing in those rectification proceedings, rather than entertaining the writ petition directly.
• This approach ensures that the statutory remedy for rectifying mistakes is utilized first, promoting efficiency and adherence to the scheme of the Act.
• The court’s decision to keep all rights and remedies open ensures that the assessee is not prejudiced by the dismissal of the writ petition and can continue to challenge the order after the rectification process.