The Patna High Court has clarified an important procedural safeguard under the Bihar Goods and Services Tax Act, 2017 (BGST Act): when a rectification decision may adversely affect a taxpayer, the assessing authority must follow the principles of natural justice and afford a personal hearing. In this case, a construction company (the petitioner) challenged the rejection of its rectification application under Section 161 of the BGST Act. The core grievance was simple but significant—no hearing was given before the application was dismissed. The Division Bench, led by the Hon’ble Chief Justice, set aside the rejection order solely on this ground and directed the assessing officer to grant a hearing and decide afresh.

At the heart of the matter was Section 161 of the BGST Act, which enables rectification of errors apparent on the face of the record. The State argued that the taxpayer’s application did not fall within this narrow compass because it did not point to an arithmetical or apparent mistake. The Court, however, focused on a procedural proviso to Section 161: where rectification “adversely affects any person,” the authority must follow principles of natural justice. The Bench underscored that even if the officer believes the application does not truly fit Section 161, the taxpayer must still be given a notice and an opportunity of personal hearing before the authority decides to reject the application. This preserves fairness and transparency, especially when the outcome may prejudice the taxpayer.

This ruling does not mean every rectification application will be allowed; far from it. The Court expressly refrained from expressing any view on the merits of the rectification sought. Instead, it concentrated on the process: the assessing officer should not dismiss such applications behind closed doors when the outcome could adversely affect the applicant. The Court therefore set aside the earlier rejection and restored the matter for a fresh decision after a personal hearing. It also specified a date by which the petitioner must appear before the assessing officer and, importantly, permitted the officer to proceed ex parte if the petitioner fails to appear. In short, the Court balanced two interests—taxpayer’s right to be heard and the department’s need for procedural efficiency—by insisting on fairness without stalling the process indefinitely.

A related but distinct point also arose: limitation. The petitioner appears to have questioned the timeliness of the original order in the background of limitation extensions. The Bench noted that this issue already stands settled by another decision of the same date, in which the Patna High Court upheld the validity of the limitation extension. By referencing that decision, the Court signaled continuity and certainty in how limitation questions arising from pandemic-era or other notified extensions should be treated. That clarity prevents repetitive disputes on the same point and keeps the focus of the present matter on whether the rectification request itself should be heard on merits after complying with natural justice.

Practically, what does this judgment mean for taxpayers and the department?

For taxpayers: if you file a rectification application under Section 161—say to correct an apparent mistake in an assessment or order—and the tax authority is inclined to reject it, you are entitled to a notice and a meaningful opportunity to be heard, provided the proposed decision may adversely affect you. You should be ready to attend the hearing on the date fixed, present your points succinctly, and carry supporting documents that demonstrate the error is apparent on the face of the record. If you do not appear despite notice, the officer can proceed ex parte, and you risk losing the benefit of this procedural protection.

For the department: the Court’s direction is not a hurdle but a reminder that natural justice is integral to sustainable orders. Even when you believe a Section 161 application is outside the provision’s limited scope, issue a short notice, fix a hearing, and pass a speaking order recording your reasons. This not only aligns with the statute’s third proviso but also protects your order from being set aside on procedural grounds. A short, well-reasoned order after hearing is more likely to withstand judicial scrutiny.

The judgment thus strikes a careful balance. It does not expand the substantive reach of Section 161 beyond “errors apparent,” but it ensures that procedural fairness is not compromised when rejecting such applications. That emphasis on due process resonates across tax administration: decisions that may “adversely affect” a person should rarely be made without hearing them first. The Court’s intervention here is limited yet impactful—set aside the rejection for want of hearing, and remand the matter for a fresh decision after complying with the law’s requirement of natural justice.

Significance or Implication of the Judgment (For general public or government)

This decision reinforces a simple but vital principle: no adverse decision in a rectification proceeding under BGST Section 161 should be taken without giving the taxpayer a chance to be heard. For the public, it affirms that even “technical” applications like rectification carry a right to fair procedure. For government departments, it provides a compliance roadmap—serve notice, conduct a brief hearing, and pass a reasoned order. The ruling helps avoid unnecessary litigation on procedural lapses and encourages clarity in tax administration. It also sits alongside the Court’s broader stance upholding limitation extensions, offering predictability to both taxpayers and the department on time-bar questions linked to earlier statutory relaxations.

Legal Issue(s) Decided and the Court’s Decision with reasoning

• Whether a personal hearing is mandatory before rejecting a Section 161 BGST rectification application when the decision may adversely affect the applicant.
  – Decision: Yes. The third proviso to Section 161 requires adherence to principles of natural justice where rectification may adversely affect any person. Even if the officer believes the application falls outside Section 161, a notice and opportunity for personal hearing must be provided before rejection.
• Whether the High Court should decide the merits of the rectification in this writ.
  – Decision: No. The Court set aside the rejection order solely for want of hearing and remitted the matter to the assessing officer to decide afresh after affording a personal hearing. The Bench refrained from making any observation on the merits of the rectification sought.
• What directions govern the next steps and attendance of parties.
  – Decision: The petitioner must appear before the assessing officer on the date fixed by the Court; if the petitioner does not appear, the officer may proceed ex parte. The officer shall consider the rectification application and pass an order after hearing.
• Status of limitation extensions affecting the original order.
  – Decision: The Court reiterated that limitation extension is valid, as already held in a coordinate decision delivered on the same date, thereby disposing of the limitation objection.

Judgments Relied Upon or Cited by Court

• M/s Barhonia Engicon Private Limited v. State of Bihar & Ors., CWJC No. 4180 of 2024 (Patna High Court, decided 27.11.2024) — Upheld the validity of limitation extension; followed to address the limitation point in the present matter.

Case Title

Shreeya Construction Private Limited v. Union of India & Ors. (Patna High Court)

Case Number

Civil Writ Jurisdiction Case No. 6868 of 2024

Coram and Names of Judges — Always prefix with Hon’ble

• Hon’ble the Chief Justice K. Vinod Chandran
• Hon’ble Mr. Justice Partha Sarthy

Names of Advocates and who they appeared for

• For the petitioner: Mr. Ajay Kumar Jha, Advocate; Mr. Sanjeev Kumar, Advocate; Mr. Aman Raja, Advocate
• For the respondents (State): Mr. Vikash Kumar, SC-11

Link to Judgment

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