GST Notice must be Issued to Legal Representative before Determination of Tax Liability Post-Death of Proprietor: Allahabad HC

The Allahabad High Court has ruled that no GST (Goods and Services Tax) notice must be issued to the legal representative before determining the tax liability post-death of the proprietor as it is established that demand against a deceased in void ab initio. The representative must be informed before determining the demand.

The Court held that issuing and proceeding with a show cause notice in the name of a dead person renders the entire proceeding void ab initio.

Vishnu Agarwal, the husband and legal representative of the late Kamini Agarwal, filed a writ petition challenging an order dated 12.04.2024 under Section 73(9) of the Central Goods and Services Tax Act, 2017, which raised a demand of ₹3,09,243 in the name of his deceased wife.

Kamini Agarwal had passed away on 22.07.2020, and the GST registration of her proprietorship concern, M/s Agarwal Khilona Bazar, was cancelled with effect from 08.09.2022 by order dated 16.01.2023.

Despite this, a show cause notice was issued in her name on 23.12.2023 and uploaded on the GST portal, which remained unanswered due to the lack of any active monitoring by the deceased’s legal heir.

The petitioner argued that the entire demand was raised on the basis of proceedings initiated against a person who was no longer alive, and no opportunity was provided to him, the legal heir, to present his case. The proceedings, therefore, stood vitiated for want of notice and natural justice.

The Revenue, in its defense, relied on Section 93 of the CGST Act, which provides that a legal representative can be held liable to pay tax, interest, or penalty from the estate of the deceased if the business is discontinued.

However, the Court clarified that while Section 93 establishes the liability of a legal representative, it does not empower the authorities to initiate or complete adjudication against a deceased person without involving their legal heir.

A Division Bench comprising Chief Justice Arun Bhansali and Justice Kshitij Shailendra held that the provision mandates that a legal representative must be issued a show cause notice and given an opportunity to respond before any determination of liability is made. The absence of such notice in this case rendered the proceedings unsustainable.

The Court observed that “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.”

Accordingly, the High Court quashed the order and allowed the writ petition. However, it granted liberty to the tax department to initiate appropriate proceedings afresh, in accordance with law, after issuing due notice to the legal representative.

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