2025 (4) TMI 1642 - HC - GST

Issuance of SCN and demand against a deceased person - HELD THAT - A perusal of the Section 93 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. 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

1. ISSUES PRESENTED and CONSIDERED

- Whether a show cause notice and subsequent demand under Section 73 of the Goods and Services Tax Act, 2017 can be validly issued and made against a deceased person.

- Whether the liability to pay tax, interest, or penalty after the death of a proprietor can be determined and recovered from the legal representative without issuing notice to the legal representative.

- The scope and interpretation of Section 93 of the Goods and Services Tax Act, 2017 concerning the liability of legal representatives post the death of the person liable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of issuing a show cause notice and raising demand against a deceased person

Relevant legal framework and precedents:

The primary statutory provision under consideration is Section 73 of the Goods and Services Tax Act, 2017, which deals with the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized. The procedural requirement involves issuance of a show cause notice to the person liable to pay tax.

Court's interpretation and reasoning:

The Court observed that in the present case, the show cause notice dated 16.12.2023 and subsequent reminders were issued in the name of the deceased proprietor, Ashok Kumar, after his death on 15.05.2019. The GST registration of the proprietorship firm was cancelled effective 13.05.2021. Since the show cause notice was uploaded on the portal and the registration was cancelled, the petitioner, as the legal representative, had no occasion to access or respond to the notice.

Key evidence and findings:

The undisputed fact that the show cause notice and demand were issued posthumously, and the registration cancellation was prior to issuance of the notice, was pivotal. The petitioner's inability to respond due to lack of notice was also a key consideration.

Application of law to facts:

The Court held that issuing a show cause notice and making a determination against a deceased person is not permissible. The procedural fairness requires that the legal representative must be issued notice to enable response, especially since the person against whom the demand is raised is no longer alive.

Treatment of competing arguments:

The respondents relied on Section 93 of the Act to justify recovery from legal representatives. However, the Court distinguished between the liability of legal representatives and the procedural requirement of issuing notice before determination. The Court held that Section 93 does not authorize determination against a deceased person directly.

Conclusions:

The issuance of show cause notice and demand against the deceased without notice to the legal representative is void ab initio and unsustainable.

Issue 2: Interpretation and application of Section 93 of the Goods and Services Tax Act, 2017

Relevant legal framework and precedents:

Section 93(1) of the Act provides that where a person liable to pay tax dies, the legal representative is liable to pay tax, interest, or penalty due from such person. It distinguishes two scenarios: (a) if the business is continued by the legal representative or others, they are liable; (b) if the business is discontinued, the legal representative is liable to the extent of the estate's capacity.

Court's interpretation and reasoning:

The Court interpreted Section 93 as dealing exclusively with the liability to pay tax, interest, or penalty post-death, but not with the procedural aspect of determination of such liability. The provision does not empower the authorities to make determination against a deceased person directly. Instead, it contemplates that the legal representative be made party to the proceedings.

Key evidence and findings:

The statutory language was scrutinized to highlight that determination and recovery must be from the legal representative and not the deceased. The absence of notice to the legal representative in the present case was found to be a fatal procedural lapse.

Application of law to facts:

Since the business was discontinued after death and the registration cancelled, the legal representative is liable only to the extent of the estate. However, the legal representative must be issued a show cause notice and given opportunity to respond before any determination.

Treatment of competing arguments:

The respondents' argument that Section 93 authorizes recovery from legal representatives even after determination against the deceased was rejected as misreading the provision. The Court emphasized the necessity of procedural fairness and adherence to statutory mandates.

Conclusions:

Section 93 mandates liability of legal representatives but does not dispense with the requirement of issuing notice and conducting determination proceedings against them rather than the deceased.

3. SIGNIFICANT HOLDINGS

"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."

"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."

Core principles established:

• Determination of tax liability under the GST Act cannot be made against a deceased person.
• Legal representatives become liable post-death but must be issued proper notice and given opportunity to respond before any determination or recovery.
• Procedural fairness and adherence to statutory provisions are mandatory in tax proceedings involving deceased persons and their legal representatives.

Final determinations on each issue:

• The show cause notice and demand raised against the deceased proprietor are void and quashed.
• The authorities are free to initiate fresh proceedings against the legal representative in accordance with law, ensuring issuance of proper notice and opportunity of hearing.