Rectification Application filed within Limitation not be Examined with ‘Microscope’: Allahabad HC sets aside GST Order [Read Order]

The Allahabad High Court recently set aside a Goods and Services Tax (GST) adjudication order, holding that when a rectification application is filed within the statutory limitation period and is pursued in good faith, it is imperative that the time during which it remained pending for adjudication be excluded to calculate the period of limitation for filing a subsequent appeal under Section107 of the GST Act, 2017.

The decision was rendered in a writ tax filed by M/s Prakash Medical Stores - a registered dealer who was subjected to an ex-parte adjudication order dated 23.04.2024 under Section 73 of the Uttar Pradesh GST Act for the financial year 2018-19.

The order ascribed tax liability, interest, and penalty demand on the petitioner aggregating to over ₹15 lakh.

Exactly a month from the order, the petitioner filed an application under Section 161 of the Act on 23 May 2024, seeking rectification of errors apparent on record in the adjudication order.

The rectification application was rejected on 22 October 2024 as not maintainable.

Although the petitioner preferred a first appeal under Section 107 on 29 November 2024, it was dismissed by the appellate authority as time-barred.

The current writ tax was instituted due to the non-functionality of the Goods and Services Tax Appellate Tribunal.

Shubham Agrawal appeared on behalf of the petitioner and stated that though Section 14 of the Limitation Act, 1963 does not apply to proceedings under the GST Act, the underlying principle contained in Section 14 of the Limitation Act does apply and that the appellate authority had erred in declining the benefit of limitation to the petitioner.

Ankur Agarwal, Standing Counsel, representing the State tax department disputed the submissions of the petitioner.

The Division Bench comprising Justice Saumitra Dayal Singh and Justice Vivek Saran considered the scope of Section 107 (Appeals to Appellate Authority) and Section 161 (Rectification of errors apparent on the face of record) of the UP GST Act, alongside Section 14 of the Limitation Act, 1963, which provides for exclusion of time spent bona fide in proceedings before a court without jurisdiction or under a similar defect.

The Court referenced the Supreme Court decision in M.P. Steel Corporation v. Commissioner of Central Excise (2015) where it was held that while the Limitation Act may not apply directly to tax proceedings, the underlying principle of Section 14 applies to exclude the time spent in bona fide pursuit of a remedy before an incorrect forum.

Accordingly, the Court observed that the petitioner’s rectification application was filed well within the statutory period of three months as prescribed under Section 161 of the GST Act, and that the time during which it remained pending for adjudication be excluded for the purpose of calculating limitation for the subsequent appeal.

In this regard, the Court stated:

“Wherever an application seeking rectification of mistake apparent on the face of record may be filed within time, the application of the underlying principle of Section 14 of the Limitation Act may not be examined with a microscope. To the extent that application is filed bona fide and pursued, that principle would apply, without doubt.”

The Allahabad High Court thus set aside the order of the appellate authority and restored the appeal to its original number and status, with the direction that the appeal be decided on merits and in accordance with law, expeditiously.

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