Supreme Court Strikes Down Posthumous GST Notices, Mandates Proper Legal Representative Notification Under Tax Proceedings

The SC invalidated GST show cause notices and tax demands issued posthumously against a deceased proprietor. The Court held that tax proceedings cannot be initiated against a deceased person, and legal representatives must be properly notified. Notices issued after GST registration cancellation were deemed void. The Court quashed the existing notices and permitted authorities to initiate fresh proceedings against the legal representative in compliance with procedural requirements.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

• Whether a show cause notice and subsequent demand for tax under Section 73 of the Goods and Services Tax Act, 2017 (the Act) can be validly issued and made against a deceased person.
• Whether the provisions of Section 93 of the Act authorize the tax authorities to issue a show cause notice and determine tax liability directly against a deceased proprietor without involving the legal representative.
• Whether the tax liability determined after the death of the proprietor can be recovered from the legal representative without issuing notice to such representative and providing an opportunity of hearing.
• The procedural validity and legal effect of issuing GST demand notices in the name of a deceased person whose GST registration has already been cancelled.

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:

• Tax proceedings including issuance of show cause notices and determination of tax liability cannot be initiated or made against a deceased person.
• Legal representatives of the deceased must be the proper parties to whom notices are issued and against whom proceedings are conducted.
• Issuance of notices and determination against a deceased person without involving legal representatives is void ab initio.
• Cancellation of GST registration terminates the legal identity of the taxable person, and notices issued after cancellation must be validly addressed.

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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