GST SCN and order against a deceased person are invalid; proceedings must be initiated against legal heirs with proper notice.

Issue:

Whether a show cause notice (SCN) and a subsequent ex parte order issued under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act, 2017), are valid if they are issued and determined against a deceased person, even when the authorities had knowledge of the death and the firm’s registration was cancelled upon request from the deceased’s wife, and the SCN/order were merely uploaded on the portal without the knowledge of the legal heirs.

Facts:

The petitioner’s father, who was the proprietor of S K Industries, had died.
Subsequently, the firm’s GST registration was cancelled at the request of the proprietor’s wife.
Despite having knowledge of the proprietor’s demise and the cancellation of registration, the tax authorities issued a show cause notice (SCN) in the name of the deceased proprietor for the tax period May 2018 to September 2018.
Thereafter, an ex parte order was passed under Section 74 of the UPGST Act (dealing with demands involving fraud, etc.).
Both the SCN and the order were merely uploaded on the GST portal under a tab that was not readily apparent, and as such, the legal heirs of the proprietor remained unaware of these proceedings.
Further, the wife of the proprietor (who initially requested cancellation) had also expired.

Decision:

The court held in favor of the assessee. Citing its previous decision in Amit Kumar Sethia (Deceased) v. State of U.P. & Anr., (Allahabad), the court reiterated that where a show cause notice is issued and a determination is made against a deceased person without issuing notice to the legal representative, it is not sustainable. Therefore, proceedings should not be initiated against a deceased person, nor should they be initiated against the legal heirs or the estate of the deceased without proper notice. Accordingly, both the show cause notice and the impugned order were set aside.

Key Takeaways:

Fundamental Principle: Assessment Against Living Person: Tax proceedings, including the issuance of show cause notices and assessment orders, must be initiated and completed against a living person or a legal entity recognized by law. A deceased person cannot be subjected to tax proceedings.
Duty to Act Against Legal Representatives: Upon the death of a taxpayer, the tax authorities are obligated to proceed against the legal representatives of the deceased. This requires identifying the legal heirs and serving proper notices on them.
Knowledge of Death Immaterial if Procedure Violated: Even if the authorities had knowledge of the proprietor’s death, proceeding in the name of the deceased instead of serving proper notices on the legal heirs constitutes a fundamental procedural flaw.
Effective Service of Notice on Legal Heirs: Merely uploading an SCN or order on the GST portal, especially when the legal heirs are unaware of the proceedings and the original proprietor is deceased, does not constitute valid service on the legal heirs. Effective communication and proper service are essential for upholding natural justice.
Consequences of Invalid Proceedings: Proceedings (SCN and order) initiated and determined against a deceased person are null and void ab initio (from the beginning).
Section 93 of CGST/UPGST Act: While the specific section deals with “Special provisions regarding liability to pay tax, interest or penalty in certain cases” including legal representatives, the core of the judgment rests on the foundational principles of natural justice and proper procedure for initiating demands against a deceased person’s estate/legal heirs.
Remedy: The court set aside both the SCN and the impugned order, indicating that the entire proceedings were vitiated due to this fundamental defect. The department would need to initiate fresh, lawful proceedings against the correct parties (legal heirs) if it intends to pursue the demand.

HIGH COURT OF ALLAHABAD

Satendra Kumar

State of U.P.

Shekhar B. Saraf and Dr. Yogendra Kumar Srivastava, JJ.

WRIT TAX No. – 1728 of 2025

APRIL 21, 2025

Praveen Kumar, Vaibhav Singh for the Petitioner.

ORDER

1. Heard learned counsel appearing on behalf of the parties.

2. In the present writ petition, the following prayers have been made by the petitioner:-

“i) issue a writ, order or direction in the nature of certiorari quashing impugned show cause notice dated 12.09.2022, passed by respondent no.3, u/s 74 of the Act Annexure No.8.)

(ii) issue a writ, order or direction in the nature of certiorari quashing the impugned order dated 10.03.2023, passed u/s 74 of the CGST/UPGST Act by respondent no.3 for the tax period May, 2018 to September, 2018 (Annexure No.9).

(iii). issue any other suitable writ, order or direction which the Hon’ble Court may deem fit and proper under the facts and circumstances of the case.”

3. Facts reveals that the petitioner is son of Mr. Surendra Kumar who was the proprietor of the S.K. Industry. Mr. Surendra Kumar died on February 17, 2021. Subsequent to his death, wife of Mr. Surendra Kumar made an application before the Proper Officer for cancellation of the registration which was cancelled on July 29, 2022. In spite of having knowledge of the same, the authorities issued a show cause notice dated September 12, 2022, and thereafter, passed an ex parte order dated March 10, 2023, under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act’).

4. It is clear from the facts that the show cause notice and order both were uploaded on the portal and the same, was accordingly, not known to the legal heirs of the proprietor of the firm. The wife of Mr. Surendra Kumar has also expired and the writ petitioner, who is the son of Mr. Surendra Kumar, has filed this writ petition challenging the show cause notice and order on the ground that the same were passed against a person who was deceased. Furthermore, since information had been provided to the authorities with regard to death of the deceased person, the very initiation of the show cause notice was bad in law.

5. Learned counsel appearing on behalf of the petitioner has relied upon a Division Bench judgment of this Court presided over by Hon’ble The Chief Justice in the matter of Amit Kumar Sethia (Deceased) v. State of U.P. and another, Writ Tax No.917 of 2025 (decided on April 2, 2025 [Neutral Citation No. –2025:AHC:45317-DB]) in support of his case. The relevant paragraphs of the said judgments are provided below:-

“6. Undisputed facts are that the show cause notice, reminders and determination of tax have been made after the death of the proprietor of the firm. Provisions of Section 93 of the Act, insofar as relevant, reads as under:

“93. Special provisions regarding liability to pay tax, interest or penalty in certain cases:

(1) Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a person, liable to pay tax, interest or penalty under this Act, dies, then –

(a) if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act; and

(b) if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.”

7. A perusal of the above provision 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.

8. 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.

9. In view thereof, 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.

10. Consequently, the writ petition is allowed. The order dated 17.11.2023 (Annexure-1 to the writ petition) is quashed and set aside. The respondents would be free to take appropriate proceedings in accordance with law.”

6. In light of the above settled principle of law, it is inherent that proceedings cannot be initiated against a person who is deceased. Thus, proceedings cannot be initiated against the legal heirs of the deceased or against the estate of the deceased. However, it was open to the authorities to proceed in proper manner against the legal representative/heirs of the deceased proprietor and having failed to do so, the entire proceedings initiated from the stage of show cause notice is bad in law.

7. Following the principles laid in the judgement of Amit Kumar Sethia (Deceased) (supra), we are of the view that the entire show cause notice and the impugned order passed under Section 74 of the Act cannot sustain. Accordingly, the show cause notice dated September 12, 2022 and impugned order dated March 10, 2023 are quashed and set aside with liberty to the respondent authorities to proceed against the petitioner in accordance with law, if so advised.

8. With the above observations, the writ petition is allowed.