2025 (9) TMI 181 - HC - GST

Issuing show-cause notice and tax demand against deceased proprietor invalid; Section 93 requires notice to legal representative

HC held that issuance of a show-cause notice and tax determination in the name of a deceased proprietor was invalid. Section 93 addresses liability where ... Issuance of SCN in the name of the deceased - Cancellation of GST registration of petitioner - submissions have been made that once the Department was well aware of the fact that proprietor of the firm has already died and the registration of the firm has already been cancelled, there was no occasion for issuing show cause notices in the name of the deceased - HELD THAT:- A perusal of the 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. 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 - petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether determination of tax liability under Section 73 of the Goods and Services Tax Act, 2017 can be validly made against a deceased person. 2. Whether recovery of tax, interest or penalty from the legal representative after death of a proprietor can validate prior proceedings that were initiated and concluded in the name of the deceased without issuance of notice to the legal representative, having regard to Section 93 of the Act. 3. Whether issuance of show cause notices and passing of determination orders against a deceased proprietor, without issuing any notice to the legal representative or taking steps to bring the legal representative into proceedings, renders the proceedings void or unsustainable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of determination against a deceased person Legal framework: Section 73 of the Act permits issuance of show cause notices and determination of tax liability; Section 93 sets out special provisions regarding liability to pay tax, interest or penalty where a person liable dies, addressing liability of legal representatives where business is continued or discontinued. Precedent Treatment: No prior decisions were relied upon by the Court in the judgment; the Court's approach is statutory interpretation rather than reliance on case law. Interpretation and reasoning: Section 93(1) addresses the liability of legal representatives and others where a person liable to pay tax dies, but it does not expressly authorize initiation or completion of a determination against a person who is already deceased. The Court reasons that a statutory provision dealing with liability post-death presupposes proceedings directed to the legal representative or person who continues the business; it does not convert the dead person into a proper subject of ongoing adjudicatory proceedings. Hence, determination proceedings directed and concluded solely against a deceased individual are impermissible. Ratio vs. Obiter: Ratio - Determination under the Act cannot validly be made against a deceased person where the legal representative has not been brought into the proceedings; such determination is unsustainable. Obiter - Observations on the broader policy or administrative practice were not essential and are treated as explanatory. Conclusion: Determinations made against a deceased proprietor are invalid where the proceedings did not involve the legal representative or other statutory successor and thus cannot be sustained. Issue 2 - Effect of Section 93 on proceedings initiated/culminated in the name of the deceased Legal framework: Section 93(1)(a) and (b) delineate the liability of persons who continue the business and of the legal representative when business is discontinued, including liability to pay tax determined after death. Precedent Treatment: The Court does not treat any authority as overruling Section 93; rather, it construes the provision's reach and limits. Interpretation and reasoning: Section 93 creates liability for legal representatives but does so in terms of responsibility to pay out of the estate or by a person who continues the business. The provision does not itself constitute procedural authority to carry out tax determination against the dead. For Section 93 to apply lawfully, procedural steps must be taken to involve the legal representative (or person continuing the business) - namely, issuance of notice and opportunity to be heard - prior to or in conjunction with any determination or recovery proceedings. The statutory scheme contemplates attachment of liability to living successors, not posthumous adjudication against the deceased. Ratio vs. Obiter: Ratio - Section 93 does not operate as a substitute for due process in that it does not authorize initiating or concluding determination proceedings against a deceased person in the absence of notice to and opportunity for the legal representative. Obiter - The possibility of subsequent proceedings in accordance with law against legal representatives is permissible; such proceedings must comply with procedural requirements. Conclusion: Section 93 permits recovery from legal representatives but does not validate determinations made solely against a deceased person without notice to the legal representative; accordingly, the impugned determinations cannot stand on the basis of Section 93 alone. Issue 3 - Procedural necessity of issuing show cause notice to legal representative and consequences of failure to do so Legal framework: Principles of natural justice and statutory adjudicatory procedure requiring notice and opportunity to be heard; Section 73 and Section 93 read together govern show cause, determination and post-death liability. Precedent Treatment: The Court applies established procedural law principles to the statutory context; no divergent precedent is invoked. Interpretation and reasoning: Where a person liable to pay tax is deceased at the time of issuance of show cause notices and determination, it is a sine qua non that the legal representative be issued the show cause notice and afforded opportunity to respond before any determination is recorded. The record showed show cause notices and determinations were issued/uploaded in the name of the deceased, and the GST registration had been cancelled; as the legal representative had neither been notified nor had occasion to access the portal, the matters remained unanswered, leading to determinations against the deceased. Such procedure is deficient and cannot sustain the impugned orders. The Court emphasizes that subsequent initiation of appropriate proceedings against legal representatives remains open but must follow lawfully required notice and adjudicatory steps. Ratio vs. Obiter: Ratio - Failure to issue show cause notice to the legal representative where proceedings are taken after death renders the determination void/unsustainable. Obiter - The departmental power to reinitiate proceedings correctly, and to recover from legal representatives under Section 93, is acknowledged but procedural compliance is mandatory. Conclusion: The absence of notice to the legal representative and the putting of show cause notices and determinations in the name of a deceased person invalidates the determinations; the authority may reinitiate proceedings in accordance with law against the proper living parties. Cross-reference Issues 1-3 are interrelated: the statutory liability mechanism in Section 93 (Issue 2) does not obviate the procedural requirement (Issue 3) that the legal representative be brought into the adjudicatory process, and the absence of such procedure renders determinations against a deceased person invalid (Issue 1). Final Conclusion of the Court (ratio) The determinations and demands raised after the death of the proprietor, made against the deceased without issuance of show cause notices to or involvement of the legal representative, are quashed and set aside; the revenue may initiate fresh proceedings in accordance with law and after compliance with statutory and procedural requirements vis-à-vis the legal representative or person continuing the business.