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2025 (4) TMI 1380 - HC - GSTIssuance of SCN and subsequent demand for tax u/s 73 of the Goods and Services Tax Act 2017 (the Act) made against a deceased person - HELD THAT - A perusal 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. 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.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of issuing show cause notice and demand against a deceased person Relevant legal framework and precedents: Section 73 of the GST Act empowers authorities to issue show cause notices for recovery of tax. Section 93 of the Act specifically deals with liability to pay tax, interest or penalty in cases where the liable person dies. It provides that if the business is continued after death by legal representatives, they are liable; if discontinued, the legal representatives are liable to pay from the estate. However, there is no express provision authorizing issuance of show cause notices or determination of tax directly against a deceased person. Court's interpretation and reasoning: The Court noted that the issuance of show cause notices and determination of tax demand after the death of the proprietor against the deceased person himself is impermissible. Section 93 contemplates recovery from legal representatives but does not authorize proceedings against the deceased. The Court emphasized that the tax authorities must issue notices and conduct proceedings against the legal representatives, not the deceased. Key evidence and findings: The petitioner's GST registration was cancelled after the proprietor's death. The show cause notice and demand were issued posthumously in the name of the deceased. The petitioner had no access to the portal as the registration was cancelled, resulting in non-response to the notice. Application of law to facts: Since the notices were issued in the name of the deceased and not to the legal representative, the proceedings were void ab initio. The GST Act does not permit determination against a dead person, and the legal representative must be the party to the proceedings. Treatment of competing arguments: The respondents relied on Section 93 to argue that recovery can be made from legal representatives even after death. The Court distinguished between liability and procedural requirements, holding that Section 93 does not authorize issuance of show cause notices or determination against the deceased but only recovery from legal representatives after proper proceedings. Conclusion: The show cause notice and demand issued against the deceased proprietor without involving the legal representative are invalid. Issue 2: Requirement of issuing notice and opportunity to legal representatives before determination Relevant legal framework and precedents: Principles of natural justice and the procedural safeguards under the GST Act require that a person liable to pay tax be given notice and opportunity to respond before determination. Section 93 implies that legal representatives assume liability post death and must be given due process. Court's interpretation and reasoning: The Court held it is a sine qua non that the legal representative be issued a show cause notice and given an opportunity to respond before any determination or demand is made. Issuing notices to the deceased without involving legal representatives violates these principles. Key evidence and findings: The petitioner, as legal representative, was not served any notice or given opportunity to respond. The show cause notice and demand were uploaded on the portal in the deceased's name only. Application of law to facts: The absence of notice to the legal representative rendered the proceedings invalid. The recovery process must be initiated against the legal representative with proper notice and hearing. Treatment of competing arguments: The respondents did not dispute the need for notice but justified recovery from legal representatives under Section 93. The Court clarified that recovery is permissible only after due process involving the legal representative. Conclusion: The failure to issue notice and provide opportunity to the legal representative before determination vitiates the order. Issue 3: Effect of cancellation of GST registration on issuance of notices Relevant legal framework and precedents: Cancellation of GST registration terminates the legal identity of the taxable person under the Act. Notices issued post cancellation must be validly addressed and served. Court's interpretation and reasoning: Since the GST registration was cancelled with effect from 16.5.2021, the petitioner had no occasion or access to the GST portal to receive notices issued thereafter in the name of the deceased. The Court held that notices issued after cancellation in the deceased's name were ineffective and invalid. Key evidence and findings: The GST registration cancellation order dated 24.6.2022 was on record. Show cause notice dated 16.5.2024 and reminder dated 9.7.2024 were issued after cancellation and addressed to the deceased. Application of law to facts: The cancellation extinguished the GST registration, and issuance of notices post cancellation to the deceased was improper. Notices should have been addressed to the legal representative or estate. Treatment of competing arguments: Respondents did not specifically address the effect of cancellation on notice validity. The Court implicitly rejected any such contention. Conclusion: Notices issued post cancellation in the name of the deceased were invalid and could not form the basis for demand. 3. SIGNIFICANT HOLDINGS The Court conclusively held that: "The said provision [Section 93] cannot and does not authorise the determination to be made against a dead person and recovery thereof from the legal representative." It was established as a core principle that:
Accordingly, the Court quashed and set aside the show cause notice dated 16.5.2024 and the order dated 19.7.2024 raising demand against the deceased. The respondents were permitted to initiate fresh proceedings in accordance with law against the legal representative.
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