Rectification Was Adjudicated By The Wrong Department, And No
Personal Hearing Was Given - Delhi High Court Quashed The Demand
Introduction
One of the key safeguards
under tax law is the right of the taxpayer to seek rectification of mistakes
apparent on record. Section 161 of the Central Goods and Services Tax Act,
2017 (CGST Act) provides for such rectification. However, even in such
rectification proceedings, the fundamental principles of natural justice
— particularly the right to a personal hearing — cannot be compromised.
The case of M/s
Ganpati International vs. Commissioner of CGST, Delhi North decided by the Delhi
High Court on 12 August 2025 is an important ruling. It highlights
procedural lapses where the rectification application filed by a taxpayer was
decided by the wrong authority (Delhi GST instead of CGST), and more
importantly, without granting a personal hearing.
Case
Details
- Case Title:
M/s Ganpati International Through its Proprietor Sh. Anil Kumar v.
Commissioner of CGST, Delhi North & Ors.
- Court:
High Court of Delhi at New Delhi
- Case No.:
W.P.(C) 12117/2025 & CM APPL. 49401/2025
- Date of Order:
12 August 2025
- Impugned Order:
Order-in-Original (OIO) dated 31st January 2025, followed by Rectification
Order dated 24th June 2025
- Legal Provisions Involved:
Section 161 of the CGST Act, 2017 (Rectification of mistakes apparent on
record)
Summary of
the Case
The petitioner, M/s
Ganpati International, was issued a Show Cause Notice (SCN) dated 23rd
July 2024 along with more than 100 other entities, alleging wrongful
availment of Input Tax Credit (ITC) from a non-existent supplier, M/s Swagat
Enterprises, which had allegedly issued goods-less invoices.
Against Ganpati
International, a demand of ₹6,65,415/- was proposed, which culminated in
an Order-in-Original dated 31st January 2025 passed by the CGST
Department, Delhi North.
The petitioner filed a rectification
application claiming that the demand had been wrongly computed, as the
entire value of goods was included instead of the ITC component. Shockingly,
this rectification application was adjudicated not by the CGST Department
(which had passed the OIO), but by the Delhi GST Department, which
passed a rectification order dated 24th June 2025 against the
petitioner.
The petitioner approached
the Delhi High Court contending that (a) rectification was adjudicated by the wrong
department, and (b) no personal hearing was given in the
rectification proceedings, contrary to Section 161 of the CGST Act.
The Court agreed with the
petitioner, holding that the rectification order was procedurally flawed, and
accordingly set aside the rectification order dated 24.06.2025,
remanding the matter back to CGST with directions to grant a personal hearing.
Facts of
the Case
1. Investigation
& SCN: M/s Ganpati International was alleged to have
availed ITC fraudulently from M/s Swagat Enterprises, which issued
goods-less invoices. A Show Cause Notice dated 23rd July 2024 was issued
to over 100 entities, including the petitioner.
2. Order-in-Original
(31.01.2025): The CGST Department, Delhi North, passed
an Order-in-Original confirming demand of ₹6,65,415/- against the
petitioner.
3. Rectification
Application: The petitioner filed a rectification
application pointing out erroneous computation — arguing that the entire
value of goods had been taken into account rather than the actual ITC wrongly
availed.
4. Rectification
Order (24.06.2025): Instead of CGST, the Delhi GST
Department adjudicated the rectification application and passed an order
dated 24th June 2025. No personal hearing was granted to the petitioner
before passing this order.
5. Petition
before High Court: Aggrieved, the petitioner approached the
Delhi High Court under Article 226 of the Constitution challenging both
procedural lapses.
Submissions
by the Petitioner
The petitioner, through
counsel, contended:
- Wrong Authority Adjudicated
Rectification
- Since the original order dated
31.01.2025 was passed by the CGST Department, only CGST could have
decided the rectification application.
- Adjudication by Delhi GST Department
was without jurisdiction and contrary to law.
- No Personal Hearing
- Section 161 of the CGST Act requires
granting a hearing in rectification proceedings.
- Denial of such hearing was a clear violation
of natural justice.
- Erroneous Computation
- The demand wrongly included the entire
value of goods instead of restricting to the ITC portion.
- This mistake was apparent from
record and ought to have been rectified properly.
- Relief Sought
- Quashing of the rectification order
dated 24.06.2025.
- Fresh consideration of rectification
application by CGST with due hearing.
Defence by
the Respondents
The respondents (Delhi
GST & CGST), through counsel, submitted:
- Jurisdictional Overlap
- It was admitted that rectification
applications are generally to be decided by the same authority which
passed the original order.
- Hence, the rectification application
should have been adjudicated by CGST and not Delhi GST.
- Opportunity for Fresh Hearing
- The Department was willing to
reconsider the rectification application afresh by the CGST authority.
- No Prejudice
- The Department argued that no
prejudice would be caused as the matter could be remanded back for fresh
adjudication.
Observations
of the Court
The Delhi High Court made
the following critical observations:
1. On
Wrong Authority
o The
Court observed that the OIO was passed by CGST Delhi North, but
rectification was adjudicated by Delhi GST Department.
o This
was procedurally incorrect — the same authority which passed the OIO must deal
with rectification.
2. On
Lack of Hearing
o The
petitioner was not given a personal hearing in the rectification
proceedings, despite Section 161 and its 3rd Proviso mandating such a hearing.
o This
amounted to a clear violation of natural justice.
3. On
Legal Principle
o Procedural
safeguards under Section 161 are not empty formalities; they ensure fairness in
adjudication.
o Even
rectification of mistakes requires observance of audi alteram partem
(hear the other side).
Judgment of
the Court
The Court ruled as
follows:
- Rectification Order dated 24.06.2025
set aside for being passed by the wrong
authority and without hearing.
- The rectification application of
Ganpati International shall be considered afresh by the CGST
Department, Delhi North.
- The CGST Department shall provide a personal
hearing to the petitioner in compliance with the 3rd Proviso of
Section 161.
- Petition was disposed of in these
terms.
Conclusion
The ruling in M/s
Ganpati International vs. Commissioner of CGST, Delhi North is significant
for taxpayers and practitioners because it clarifies two key procedural
safeguards:
1. Jurisdictional
Consistency: A rectification application must be
decided by the same authority which passed the original order.
2. Right
to Hearing in Rectification: Even in rectification proceedings,
a personal hearing is mandatory under Section 161.
The judgment protects
taxpayers against arbitrary rectification orders and strengthens the
principle of natural justice in GST administration.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
Press On Click Here To Download Order File
Click here
