GST Authorities Cannot Pass Orders Against Deceased Taxpayer, Recover From Heirs: Allahabad High Court

The Allahabad High Court has held that while GST law allows proceedings to be pursued against a legal heir after the death of a taxpayer, authorities cannot determine tax liability in the name of a deceased person and then recover it from the heir.

The court ruled that Section 93 of the Goods and Services Tax Act, 2017, permits recovery from legal representatives only after a valid determination against them, and not through orders passed against a dead assessee.

A bench of Justice Shekhar B Saraf and Justice Manjive Shukla clarified that Section 93 addresses liability in situations where a business is continued or discontinued after the death of its owner. It does not authorise the department to initiate or continue determination proceedings against a person who is no longer alive.

The bench observed, “A perusal of the above provision 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.”

The case was brought by Rajvanti Devi, whose husband Virendra Kumar Maurya ran a sole proprietorship and died on May 20, 2021. Despite his death, the GST department issued a show cause notice under Section 73 of the Act in his name in December 2023. As the notice was addressed to the deceased, it remained unanswered. An order dated April 29, 2024, then raised a demand of Rs 19.87 lakh against him.

The petitioner told the court that the department was fully aware of her husband's death and that the firm's GST registration had already been cancelled. It was argued that there was no justification for issuing a notice or passing an order in the name of the deceased. The state department defended the action by relying on Section 93 and contended that recovery could be made from the legal representative even if the determination was made after the death of the proprietor.

Rejecting this stand, the court said that once liability is sought to be fastened on a legal representative, issuance of a show cause notice to that person is mandatory before any determination.

The bench said, “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.”

As the proceedings in this case were conducted entirely in the name of a deceased person, the demand order was quashed. The court, however, granted liberty to the authorities to initiate fresh proceedings against the heir in accordance with law.