S.161 CGST Act | Rectification Order Must Be Reasoned, Adverse Order Can Be Passed Only After Hearing Party: Delhi High Court

The Delhi High Court has made it clear that an order in rectification proceedings must be reasoned, passed after affording an opportunity of hearing to the party.A division bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta made the observation while dealing with a petition against rejection of Petitioner's application seeking rectification of impugned demand orderPetitioner pointed out that in terms of the proviso 3 to Section 161 of the Central/Delhi Goods and Services Tax Act, 2017 it ought to have been afforded hearing while deciding the rectification application. However no hearing was given to the Petitioner and rectification was rejected.It contended that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority.At the outset, the High Court noted that while the demand order was a reasoned order, “However, it is noticed that the impugned rectification order while dismissing the rectification application only states that the application filed by the Petitioner is found to be 'unsatisfactory' without recording any reasons to substantiate its finding.”Thus it held that the impugned rectification order is “cryptic and non-speaking” in nature.Further considering the fact that hearing, in terms of proviso 3 to Section 161 of the CGST/DGST Act was not provided to the Petitioner, the Court set aside the impugned rectification order.It relied on HVR Solar Private Limited v. Sales Tax Officer (2025) where it was held that an order rejecting the rectification application filed by an assessee cannot be passed without first hearing the assessee.“As per proviso 3 to Section 161, the rectification order, if allowed in favour of the Petitioner seeking rectification, hearing can be dispensed with. However, if the rectification is to be decided adversely affecting the right of the applicant, the principles of natural justice have to be followed and a hearing ought to be given, if sought,” it was held therein.As such, the matter was relegated back to the concerned Adjudicating Authority for the Petitioner to be provided a proper hearing in the rectification application.Appearance: Mr. R.P. Singh, Mr. Nirmal Dixit, Mr. Rahul Ranjan, Mr. Anant Vijay & Mr. Harshit Garg, Advs for Petitioner; Mr Aakarsh Srivastava, Senior Standing Counsel with Mr. Anugya Gupta & Mr. Anand Pandey, Advs. Mr. Urvi Mohan, Adv. for GNCTD.Case title: M/S Ambience Metcorp Private Limited Through Its Director Sh Sandeep Agarwal v. Central Board Of Indirect Taxes And Customs Through Its Chairman & Anr.Citation: 2025 LiveLaw (Del) 653Case no.: W.P.(C) 5901/2025Click here to read order

S.161 CGST Act | Rectification Order Must Be Reasoned, Adverse Order Can Be Passed Only After Hearing Party: Delhi High Court

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