2025 (4) TMI 491 - HC - GST

Challenge to impugned notice followed by the reminder aforesaid - challenge primarily on the ground that the same were issued to a dead person and therefore nullity in the eye of law - HELD THAT - It is opied that no recoveries could be made in respect of the demand raised with respect to financial year 2017-18 against the petitioners. The petitioners who were never heard by the STO before confirming the demand cannot be held liable to discharge the tax liability in terms of Section 93 of the Act of 2017 which their predecessor-in-interest incurred during his lifetime. Indisputably the return for the relevant year stood accepted by the respondents. It is only on scrutiny it was found that there was some variance between the returns GSTR-1 and GSTR-3B. This necessitated the issuance of statutory notice under Section 74 of the Act of 2017 - the demand came to be confirmed and notice of recovery dated 19.08.2024 came to be issued by the Tehsildar Assistant Collector 1st Class Bari Brahmana against the petitioners. The petitioners are rightly aggrieved and are before us to challenge the entire proceedings initiated by STO after the return of the deceased Wali Mohd was picked up on scrutiny which was followed by statutory notice in terms of Section 74 of the Act of 2017. Once it is not in dispute that Wali Mohd had died on 22.07.2019 it was incumbent upon the respondents to issue statutory notice in terms of Section 74 of the Act of 2017 to the petitioners who are admittedly the legal heirs of the deceased Wali Mohd and provide them an adequate opportunity of being heard before raising or confirming any demand. This however did not happen. The entire proceedings after the scrutiny till the issuance of the recovery notice are therefore vitiated for the non compliance of the principles of natural justice. The legal position enumerated in Section 93 is not in dispute however the proceedings which were undertaken by the STO upon scrutiny of the return filed by the tax payer Wali Mohd for the financial year 2017-18 and the proceedings that followed thereafter culminating into issuance of impugned notice of recovery against the petitioners are vitiated in law and cannot be sustained. Conclusion - Being the legal heirs of assessee late Wali Mohd the petitioners were entitled to contest the notice issued by STO under Section 74 of the Act of 2017 more particularly when the assessee was not in this world to contest the proceedings. Petition allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the issuance of a show cause notice and subsequent recovery proceedings against a deceased person, without notifying the legal heirs, is valid under the J&K GST Act, 2017.
Whether the principles of natural justice were violated by failing to provide the legal heirs an opportunity to be heard before confirming the tax demand.
The applicability of Section 93 of the J&K GST Act, 2017 regarding the recovery of tax from the legal representatives of a deceased taxpayer.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Notices Issued to a Deceased Person

Relevant Legal Framework and Precedents: The legal framework under consideration is the J&K GST Act, 2017, particularly Section 74, which deals with the issuance of notices for tax discrepancies, and Section 93, which addresses the recovery of tax from legal representatives.
Court's Interpretation and Reasoning: The Court noted that the notices were issued to Wali Mohd after his death on 22.07.2019. The respondents admitted that the statutory notice under Section 74 was first issued on 02.01.2021, well after the taxpayer's death. The Court found that issuing notices to a deceased person without notifying the legal heirs is a nullity in law.
Key Evidence and Findings: The death certificate of Wali Mohd and the timeline of issued notices were crucial in establishing that the notices were improperly addressed to a deceased individual.
Application of Law to Facts: The Court applied the principles of natural justice, emphasizing that the legal heirs were entitled to notice and an opportunity to be heard before any demand confirmation.
Treatment of Competing Arguments: The respondents argued that the statutory notice was properly issued under the Act. However, the Court rejected this, highlighting the failure to notify the legal heirs.
Conclusions: The Court concluded that the notices and subsequent proceedings were invalid due to non-compliance with legal requirements and principles of natural justice.

2. Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that parties affected by a legal decision must be given a fair opportunity to present their case.
Court's Interpretation and Reasoning: The Court emphasized that the legal heirs of Wali Mohd were not given an opportunity to contest the tax demand, which is a fundamental breach of natural justice.
Key Evidence and Findings: The lack of communication to the legal heirs and the absence of any opportunity for them to respond were central to the Court's findings.
Application of Law to Facts: The Court applied the principles of natural justice, ruling that the entire proceedings were vitiated due to the failure to notify and hear the legal heirs.
Treatment of Competing Arguments: The respondents' position that the notices were valid was dismissed due to the procedural deficiencies identified by the Court.
Conclusions: The Court held that the proceedings were void for failing to adhere to the principles of natural justice.

3. Applicability of Section 93 of the J&K GST Act, 2017

Relevant Legal Framework and Precedents: Section 93 of the J&K GST Act, 2017 allows for the recovery of tax from the legal representatives of a deceased taxpayer.
Court's Interpretation and Reasoning: The Court acknowledged the provision under Section 93 but clarified that it does not dispense with the need to follow due process and principles of natural justice.
Key Evidence and Findings: The Court found that while Section 93 allows for recovery from legal heirs, the procedural requirements were not met in this case.
Application of Law to Facts: The Court determined that the proceedings were invalid due to the lack of notice and opportunity for the legal heirs to be heard, despite the provisions of Section 93.
Treatment of Competing Arguments: The respondents' reliance on Section 93 was insufficient to overcome the procedural deficiencies.
Conclusions: The Court concluded that the proceedings were invalid, and any recovery must comply with procedural requirements.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The entire proceedings after the scrutiny till the issuance of the recovery notice are therefore vitiated for the non-compliance of the principles of natural justice."
Core principles established: The judgment reinforces the necessity of adhering to principles of natural justice and due process, particularly in cases involving deceased taxpayers and their legal heirs.
Final determinations on each issue: The Court quashed the show cause notice dated 31.07.2024, the reminder dated 26.09.2024, and the recovery notice dated 19.08.2024, allowing the respondents to initiate fresh proceedings in compliance with legal requirements.

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