Abatement of service tax proceedings on death of a service provider: proceeding cannot continue; Order-in-Original set aside

Assessment of service tax abated on death of the individual service provider because the statutory scheme treats the assessee as a "person" and the definition's use of "includes" cannot be read to extend liability to a legal heir or to create substantive liability via machinery provisions; consequently proceedings under the relevant assessment provision initiated by a demand-cum-show cause notice could not be continued or culminate in an Order-in-Original against a deceased person. The impugned Order-in-Original and consequent recovery initiation were set aside and the writ petition allowed, as recovery action against the deceased was held invalid.

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Issues: Whether proceedings for recovery of service tax initiated by issue of a Demand-cum-Show Cause Notice can be continued and an Order-in-Original under Section 73 of the Finance Act, 1994 be passed in the name of an individual assessee after his death in the absence of any statutory provision empowering continuation against legal heirs.

Analysis: The applicable legal framework includes the charging and procedural provisions of Chapter V of the Finance Act, 1994, in particular the definition of "assessee" in Section 65(7), the machinery and recovery provisions in Sections 69, 73, 75, 77, 78 and Section 87, and the saving and interpretation provisions in Section 65(121). Principles governing interpretation of taxing statutes require strict construction of charging provisions and that nothing should be implied into a taxing statute which is not expressed. Definitions of "person" in the General Clauses Act and the legal distinction between an "agent" and a "legal heir" are relevant to the question whether legal heirs can be treated as persons chargeable under the Act. Precedent establishes that where the statute does not expressly provide for continuation of assessment or recovery proceedings against a deceased person or his legal representatives, proceedings initiated against the deceased abate on death. The facts show that the Demand-cum-Show Cause Notice was issued in the lifetime of the service provider, the death of the individual was communicated to the authority well before passing of the Order-in-Original, and no statutory provision in Chapter V authorises continuing the Section 73 proceeding against legal heirs or treating them as the "assessee" or as the deceased's "agent." Given the absence of any express legislative provision to continue the assessment or to fasten liability on legal heirs, the Order-in-Original issued after the death in the name of the deceased is vitiated and recovery steps based on that order cannot be validly taken.

Conclusion: The proceeding under Section 73 abated on the death of the individual service provider and the Order-in-Original dated 30.08.2024 and consequent recovery action are quashed; decision is in favour of the assessee.

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