2025 (4) TMI 238 - HC - GST

Raising of demand against a deceased individual without issuing a show cause notice to the legal representative of the deceased - Section 73 of the Goods and Services Tax Act 2017 - HELD THAT - A perusal of the Section 93 of GST Act would reveal that the same only deals with the liability to pay tax interest or penalty in a case where the business is continued after the death by the legal representative or where the business is discontinued however the provision does not deal with the fact as to whether the determination at all can take place against a deceased person and the said provision cannot and does not authorise the determination to be made against a dead person and recovery thereof from the legal representative. Once the provision deals with the liability of a legal representative on account of death of the proprietor of the firm it is sine qua non that the legal representative is issued a show cause notice and after seeking response from the legal representative the determination should take place. Conclusion - The determination made in the present case wherein the show cause notice was issued and the determination was made against the dead person without issuing notice to the legal representative cannot be sustained. Petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether a tax demand under Section 73 of the Goods and Services Tax Act, 2017, can be validly raised against a deceased individual without issuing a show cause notice to the legal representative of the deceased. The Court also considered whether the provisions of Section 93 of the Act, which address the liability of legal representatives, were applicable in this context.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The primary legal provisions involved are Sections 73 and 93 of the Goods and Services Tax Act, 2017. Section 73 pertains to the determination of tax not paid or short paid, while Section 93 deals with the liability of legal representatives in cases where the person liable to pay tax dies.

Court's Interpretation and Reasoning

The Court interpreted Section 93 to mean that while it outlines the liability of legal representatives to pay tax, interest, or penalty from the estate of the deceased, it does not authorize the initiation of proceedings or determination of tax liability against a deceased person. The Court emphasized that the legal representative must be issued a show cause notice, and their response should be considered in the determination process.

Key Evidence and Findings

The undisputed facts were that the show cause notice and subsequent tax determination were issued after the death of the proprietor, Amit Kumar Sethia, without notifying his legal representative, Alka Sethia. The GST registration of the firm was canceled following his death, and the notices were uploaded to a portal that the petitioner had no occasion to access.

Application of Law to Facts

Applying the legal principles from Section 93, the Court found that the proceedings conducted against the deceased were void ab initio. The law requires that the legal representative be notified and given an opportunity to respond before any tax determination is made. Since this process was not followed, the determination was deemed unsustainable.

Treatment of Competing Arguments

The respondents argued that Section 93 allows for recovery from legal representatives even after the determination is made posthumously. However, the Court rejected this interpretation, clarifying that Section 93 presupposes a valid determination process involving the legal representative, which did not occur in this case.

Conclusions

The Court concluded that the determination made against the deceased without involving the legal representative was invalid. The order dated 17.11.2023 was quashed, and the respondents were permitted to initiate appropriate proceedings in accordance with the law, ensuring the legal representative is duly notified.

SIGNIFICANT HOLDINGS

The Court held that proceedings under Section 73 of the Goods and Services Tax Act, 2017, cannot be validly conducted against a deceased person without involving the legal representative. The judgment emphasizes the necessity of issuing a show cause notice to the legal representative and considering their response before making any tax determination.

"The provision does not deal with the fact as to whether the determination at all can take place against a deceased person and the said provision cannot and does not authorize the determination to be made against a dead person and recovery thereof from the legal representative."

The core principle established is that legal proceedings affecting the estate of a deceased must involve the legal representative, ensuring due process and adherence to statutory requirements.

The final determination was that the impugned order was quashed, and the respondents were directed to undertake any further proceedings in compliance with the law, specifically involving the legal representative in the process.