2025 (12) TMI 937 - HC - GST

Proceedings u/s73 U.P. GST Act Against Deceased Proprietor Void; s.93 Requires Notices to Legal Representatives

HC quashed the order passed u/s 73 of the U.P. GST Act, holding that proceedings initiated and concluded in the name of a deceased sole proprietor are ... Challenge to order passed u/s 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 - proprietor of the firm has already died and the registration of the firm has already been cancelled - validity of proceedings conducted in the name of the deceased - HELD THAT:- A perusal of Section 93 of the Act, 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. 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 1.1 Whether proceedings for determination of tax liability under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 can validly be initiated and concluded in the name of a person who had died prior to issuance of the show cause notice. 1.2 Whether Section 93 of the Uttar Pradesh Goods and Services Tax Act, 2017 authorises determination of tax liability against a deceased person and recovery thereof from the legal representative without issuing notice to such legal representative. 1.3 Whether, in case of death of the proprietor, issuance of show cause notice and conduct of proceedings against the legal representative is a sine qua non for valid determination of tax, interest or penalty. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of proceedings under Section 73 initiated and concluded against a deceased person Legal framework 2.1 The proceedings were initiated under Section 73 of the Uttar Pradesh Goods and Services Tax Act, 2017 by issuance of a show cause notice dated 30.11.2024, followed by a determination order dated 25.02.2025 raising demand against the deceased proprietor. Interpretation and reasoning 2.2 It was undisputed that the proprietor had died on 26.04.2021 and that the show cause notice, reminders and determination of tax were all made subsequent to his death. 2.3 The Court noted that once it is known that the proprietor has died and the registration of the firm has been cancelled, there was no occasion for passing an order in the name of the deceased. 2.4 The Court treated proceedings conducted in the name of a deceased person, without addressing the legal representative, as fundamentally defective and not sustainable in law. Conclusions 2.5 Proceedings for determination of tax liability under Section 73 cannot validly be initiated or concluded in the name of a person who was already dead at the time of issuance of the show cause notice. 2.6 The determination order passed against the deceased proprietor is void and cannot be sustained. Issue 2: Scope and effect of Section 93 regarding liability of legal representatives and determination against a deceased person Legal framework 2.7 Section 93 of the Uttar Pradesh Goods and Services Tax Act, 2017 was extracted and considered. It provides for 'special provisions regarding liability to pay tax, interest or penalty in certain cases' where a person liable under the Act dies, and stipulates liability of the legal representative or other person either where the business is continued or where it is discontinued, 'whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.' Interpretation and reasoning 2.8 The respondents invoked Section 93 to justify recovery from the legal representatives even where determination is made after the death of the proprietor. 2.9 The Court examined Section 93 and held that the provision only deals with the liability to pay tax, interest or penalty in cases where, after the death of the person, the business is either continued by the legal representative/other person or is discontinued, and the estate is made liable to the extent it can meet the charge. 2.10 The Court clarified that Section 93 does not address, nor does it authorise, the making of a determination itself against a dead person; it only regulates from whom and to what extent previously determined or subsequently determined dues may be recovered. Conclusions 2.11 Section 93 cannot be construed to permit initiation or completion of adjudication and determination proceedings against a deceased person. 2.12 Section 93 only governs the liability and recovery from legal representatives or the estate; it does not validate determinations made in the name of a dead person. Issue 3: Necessity of issuing show cause notice to legal representatives upon death of proprietor Interpretation and reasoning 2.13 The Court observed that once the statute (Section 93) deals with the liability of a legal representative on account of death of the proprietor, it becomes a sine qua non that the legal representative must be issued a show cause notice. 2.14 It was held that only after issuing such notice and obtaining a response from the legal representative can any lawful determination of tax, interest or penalty be made. 2.15 In the present case, no show cause notice was issued to the legal representative; all steps, including determination, were taken in the name of the deceased. Conclusions 2.16 Issuance of a show cause notice to the legal representative and affording an opportunity of response is mandatory for valid determination where the person originally liable has died. 2.17 Since the determination was made solely against the deceased without notice to the legal representative, the order dated 25.02.2025 is liable to be quashed. 2.18 The impugned order was set aside, with liberty to the authorities to initiate appropriate proceedings afresh in accordance with law, including by issuing proper notice to the legal representative if so advised.