Demand Order Against Deceased Proprietor Quashed; Proceedings Against Legal Heir Must Follow Due Process.

Issue:

Whether a demand order passed under Section 73(9) of the Central Goods and Services Tax Act, 2017 (CGST Act) is sustainable if it is issued in the name of a deceased proprietor and served through the GST portal (whose registration was cancelled post-death), without serving the Show Cause Notice (SCN) and providing an opportunity of hearing to the legal representative.

Facts:

An order was passed under Section 73(9) dated July 31, 2024, raising a demand in the name of ‘D’. The petitioner, ‘D”s son, filed the instant petition, submitting that ‘D’ had died on May 1, 2021. Due to his death, the GST registration of his proprietorship firm, which was in ‘D”s name, was cancelled with effect from April 1, 2021. The petitioner further submitted that the show cause notice (SCN), reminders, and the final determination of tax were all issued in the name of the deceased person and uploaded on the GST portal. Since the registration had been cancelled, the petitioner (legal heir) had no occasion to access the portal and, therefore, was unaware of these communications.

Decision:

In favor of the assessee: The court noted the undisputed facts that the show cause notice, reminders, and the final determination of tax had all been made after the death of the proprietor of the firm. The court emphasized that it is a sine qua non (an essential condition) that the legal representative must be issued the SCN, and after seeking a reply from the representative, the determination should have taken place. Accordingly, the impugned order, having been passed against a deceased person without following due process for the legal representative, could not be sustained. Consequently, the impugned order was set aside.

Key Takeaways:

Proceedings Against Deceased Persons are Void: This judgment reaffirms the fundamental legal principle that assessment or demand proceedings cannot be validly initiated or continued against a person who is deceased. Any order passed against a dead person is considered null and void.
Mandatory Notice to Legal Representative (Section 93 CGST Act): The CGST Act (specifically Section 93, though not explicitly cited in the decision summary, is the relevant provision) provides for the liability of a legal representative in case of the death of a taxable person. However, this liability can only be enforced after due process, which mandatorily includes issuing the show cause notice directly to the legal representative and affording them an opportunity to respond and be heard.
Proper Service of Notice on Legal Heirs: Uploading a notice on a GST portal that has been cancelled due to the death of the proprietor does not constitute proper service on the legal heir. The legal heir must be separately and specifically served with the notice, acknowledging their status as the legal representative.
Violation of Natural Justice: The failure to issue an SCN to the correct legal entity (the legal representative) and the denial of an opportunity for them to present their case constitutes a grave violation of the principles of natural justice.
Consequences of Procedural Infirmity: Orders passed in disregard of these fundamental procedural requirements are liable to be set aside. While the court sets aside the order, it typically implicitly allows the department to initiate fresh proceedings against the legal representative in accordance with the law, if the limitation period permits and the claim is otherwise valid.
Importance of Timely Information to Department: While the department has a duty to identify legal heirs, it is also advisable for legal heirs to inform the GST authorities about the death of a registered proprietor and seek cancellation/amendment of registration to avoid such issues.

HIGH COURT OF ALLAHABAD

Devendra Kumar Singh

State of U.P.

Arun Bhansali, CJ.
and Kshitij Shailendra, J.

WRIT TAX No. – 2109 of 2025

MAY 8, 2025

Ajay Kumar Yadav, Ashish Bansal and Siddharth Yadavfor the Petitioner. Ankur Agarwal, SC for the Respondent.

ORDER

1. This petition is directed against order dated 31.07.2024 passed under Section 73(9) of the Goods and Services Tax Act, 2017 (for short ‘the Act’) wherein a demand of Rs. 3,85,947/- has been raised in the name of Devendra Kumar Singh.

2. The petitioner Harsh Vardhan Singh, son of deceased Devendra Kumar Singh has filed the petition inter alia with the submissions that Devendra Kumar Singh had died on 01.05.2021 and on account of his death, the GST registration of the proprietorship firm M/s Devendra Kumar Singh, which was in the name of deceased Devendra Kumar Singh was cancelled with effect from 01.04.2021 by order dated 27.05.2021. Whereafter a show cause notice dated 08.05.2024 was issued in the name of deceased Devendra Kumar Singh under Section 73 of the Act, followed by reminder dated 22.06.2024, however, as the same were uploaded on the portal and the GST registration had already been cancelled, there was no occasion for the petitioner to have accessed the said portal, the show cause notice remained unanswered which resulted in passing of the order dated 31.07.2024 raising demand against the deceased.

3. Submissions have been made that once the Department was well aware of the fact that Devendra Kumar Singh, proprietor of the firm has already died and the registration of the firm has already been cancelled, there was no occasion for issuing a show cause notice in the name of the deceased and as the proceedings have been conducted in the name of the deceased Devendra Kumar Singh, the same are void ab initio and, therefore, the order impugned deserves to be quashed and set aside.

4. Learned counsel for the respondents supported the order impugned with the aid of provisions of Section 93 of the Act. Submissions have been made that under the provisions of Section 93, the recovery can be made from the legal representatives even after the determination has been made after the death of the proprietor of the firm.

5. We have considered the submissions made by counsel for the parties and have perused the material available on record.

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 31.07.2024 (Annexure-1 to the writ petition) is quashed and set aside. The respondents would be free to take appropriate proceedings in accordance with law.