Two different authorities cannot pass the two orders for confirming demand and dropping demand

The Hon'ble Madras High Court in the case of Asir Automobiles (P.) Ltd. v. Assistant Commissioner (ST), Tuticorin [Writ Petition (MD) No. 3785 to 3789 of 2024 dated July 24, 2024] held that when the Assessee had reversed credit availed on the supplies that were returned for which the supplier had issued the credit note, but without considering the same, the Authority confirmed demand and further, two Orders were passed by the two different authorities, one for confirming the demand and one for dropping the demand. Hence, the assessment order was set aside, and the matter was to be remitted to pass the fresh order.

Facts:

M/s Asir Automobiles (P.) Ltd("the Petitioner")had challenged the Assessment Orderdated August 16, 2023 ("the Impugned Order-1")and the consequential Order November 07, 2023 ("the Impugned Order-2")passed under Section 161 of the Central Goods and Services Act, 2017 ("the CGST Act") rejecting the request of the Petitioner for rectification of the purported mistakes committed in the respect of the Impugned Order-1.

The Petitioner reversed the credit availed on the returned supplies for which the supplier had issued the credit note. TheAssistant Commissioner ("the Respondent")without considering the same, had issued demanded vide the Impugned Order-1 & 2.

The Petitioner had never availed the Input Tax Credit ("ITC") on ineligible inputs as blocked credits. During the writ petition's pendency, the Respondent passed a fresh Order dated March 31, 2024 for dropping the demand.

Hence, aggrieved by the Impugned Orders the Petitioner filed the writ petition before the Hon'ble Madras High Court.

Issue:

Whether the two different authorities can pass the two orders for confirming demand and dropping demand?

Held:

The Hon'ble Madras High Court, in the case of Writ Miscellaneous Petition (MD) No. 3785 to 3789 of 2024held as under:

· Held that, two different Orders were passed by the two different authorities, one for confirming the demand and one for dropping the demand, which is unreasonable. Hence, the Impugned Orders were set aside, and the cases were remitted back to the Respondent to pass the fresh Order within three months.

Our Comments:

Section 161 of the CGST Act governs "Rectification of errors apparent on the face of record". It states that without prejudice to the provisions of section 160, and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under the State Goods and Services Tax Act or an officer appointed under the Union Territory Goods and Services Tax Act or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be:

However, that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document:

Further that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission:

Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED