2023 (9) TMI 1661 - HC - GST

Demand against a dead person for the period from April 2018 to March 2019 - liability of legal heir - continuation of the business by the surviving partners without proper registration - HELD THAT - The legal heir has received the payment of Rs. 1, 23, 07, 455.00 which has not been disclosed by the petitioner in the newly allotted GSTIN and turnover during the year 2017-18 (from 01.07.2017 to 31.03.2018) has been shown as NIL. Hence it is concluded that payment is received and tax is not paid. Further he does not dispute the Assessee s death certificate dated 15th April 2017. The Writ Petition is disposed off by setting aside the order dated 31.03.2023 under Annexure-1 passed by the opposite party No.1. So far as continuance of Proprietorship Firm is concerned it is directed that a fresh proceeding shall be initiated in which the petitioner shall be given opportunity of hearing afresh regarding discharging of liability. The said process shall be completed within a period of three months from the date of production of the certified copy of this order. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the tax demand raised against a deceased individual, Prahallad Moharana, was legally valid.
Whether the petitioner, as the legal heir, was provided with a reasonable opportunity to contest the tax demand and establish innocence.
Whether the continuation of the business by the surviving partners without proper registration impacts the liability for the tax demand.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Tax Demand Against a Deceased Person

Relevant Legal Framework and Precedents: The case involves the interpretation of tax liability under the OGST Act, particularly in relation to the issuance of tax demands against deceased individuals.
Court's Interpretation and Reasoning: The court noted that the tax demand was raised against Prahallad Moharana, who had passed away on 15.04.2017, and that the demand was based on temporary GST registration created posthumously.
Key Evidence and Findings: The evidence presented included the death certificate of Prahallad Moharana and the temporary GSTIN created in his name.
Application of Law to Facts: The court found that issuing a tax demand against a deceased person without proper communication to the legal heirs was procedurally flawed.
Treatment of Competing Arguments: The State argued that the business continued under the deceased's name, but the court emphasized proper procedural conduct in tax demands.
Conclusions: The court set aside the tax demand order, highlighting the need for proper procedural adherence and communication with legal heirs.

Issue 2: Reasonable Opportunity to Contest the Tax Demand

Relevant Legal Framework and Precedents: The principle of natural justice, which requires that individuals be given a fair opportunity to present their case, was central to this issue.
Court's Interpretation and Reasoning: The court recognized that the petitioner was not given an opportunity to respond to the tax demand, which contravened principles of natural justice.
Key Evidence and Findings: The lack of communication regarding the tax demand to the petitioner was a critical finding.
Application of Law to Facts: The court applied principles of natural justice, emphasizing the requirement for the petitioner to be heard.
Treatment of Competing Arguments: The State's position that the petitioner continued the business was not sufficient to bypass procedural fairness.
Conclusions: The court directed that a fresh proceeding be initiated, allowing the petitioner a fair hearing.

Issue 3: Continuation of Business and Tax Liability

Relevant Legal Framework and Precedents: The continuation of business operations without proper registration under the GST regime was scrutinized.
Court's Interpretation and Reasoning: The court considered the implications of continuing business activities under a deceased's name and the responsibilities of surviving partners.
Key Evidence and Findings: The evidence showed that the business was continued by the surviving partners, but the turnover was not properly disclosed.
Application of Law to Facts: The court recognized the need for proper registration and disclosure of business activities for tax purposes.
Treatment of Competing Arguments: The State's argument about undisclosed payments was acknowledged, but the court focused on procedural fairness and proper registration.
Conclusions: The court ordered a fresh proceeding to address the tax liability with proper procedural conduct.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Considering the submissions and averments made, we dispose of the Writ Petition by setting aside the order dated 31.03.2023 under Annexure-1 passed by the opposite party No.1."
Core Principles Established: The judgment reinforced the principles of natural justice, emphasizing the necessity for procedural fairness and proper communication in tax proceedings.
Final Determinations on Each Issue: The court set aside the tax demand order and directed a fresh proceeding, ensuring the petitioner receives a fair opportunity to contest the tax liability.

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