Rectification Under Section 161 of CGST Act Restricted to Patent Errors: Madras High Court Clarifies Scope in Scals Enterprises vs Commercial Tax Officer

Background and Overview

The Madras High Court recently delivered a significant ruling in Scals Enterprises Vs Commercial Tax Officer, addressing a critical question concerning the scope and limitations of the rectification remedy available under Section 161 of the Central Goods and Services Tax Act. The judgment arose from a writ petition filed by Scals Enterprises challenging an order dated 05.02.2026, specifically to the extent it dealt with the under-declaration of ineligible Input Tax Credit (ITC) for the assessment period April 2018 to March 2019.

The ruling reinforces a well-established legal principle: rectification is not an alternative channel for re-litigating substantive disputes. It is a narrow remedy, available exclusively for correcting errors that are self-evident from the face of the record — not for resolving contested questions of fact or law.

Facts of the Case

Scals Enterprises, a proprietorship concern registered under GST law in Tamil Nadu, was subjected to an assessment order — referred to as the "Order in Original" — for the tax period April 2018 to March 2019. The assessment raised two distinct issues:

  1. Alleged invalid ITC claimed under Section 16(4) of the CGST Act
  2. Under-declaration of ineligible ITC

In response to this assessment, the assessee filed a rectification application under Section 161 of the CGST Act before the Commercial Tax Officer, Cholavaram Assessment Circle.

The rectification order was issued on February 05, 2026 in FORM GST DRC-08. The outcome was mixed:

  • Partial relief granted: The rectification application was allowed with respect to the alleged invalid ITC under Section 16(4), since the authority acknowledged that the returns had in fact been filed within the extended time limit prescribed under Section 16(5) of the applicable GST statutes.
  • Rejection on the ITC under-declaration issue: However, insofar as the under-declaration of ineligible ITC was concerned, the rectification application was rejected. The assessee contended that this rejection was made solely because supporting documents had not been submitted along with the application.

Aggrieved by the partial rejection, Scals Enterprises approached the Madras High Court by way of a writ petition under Article 226 of the Constitution of India, seeking a Writ of Certiorari to quash the impugned order to the extent it pertained to the under-declaration of ineligible ITC.

Whether the rejection of a rectification application filed under Section 161 of the CGST Act, pertaining to under-declaration of ineligible ITC, can be sustained when the original order does not contain any error apparent on the face of the record?

Court's Analysis and Ruling

The Madras High Court, in W.P. No. 22391 of 2026, examined the impugned rectification order and arrived at the following findings:

Findings on the Impugned Order