GST demand against deceased proprietor quashed; Calcutta HC directs fresh notice to legal heirs

The petitioner challenged the Order-in-Original dated 21 January 2025, passed under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), raising a demand of ₹38,44,674 along with applicable interest and penalty for the period July 2017 to September 2021, covering Financial Years 2017–18 to 2020–21.

The relevant GST registration was originally in the name of the petitioner’s husband, Haradhan Pan, who died on 20 May 2021.

On 18 June 2021, the petitioner obtained a fresh GST registration in her own name for the same trade, declaring commencement of business from 21 May 2021.

An application for cancellation of the deceased proprietor’s registration was filed on 10 May 2022 and was subsequently accepted.

However, the department had issued a Show Cause Notice dated 8 March 2022 under Section 74 in the name of the deceased proprietor. The petitioner filed replies on 22 April 2024 and 6 August 2024, following which the impugned Order-in-Original was passed on 21 January 2025.

Whether a Show Cause Notice and consequential tax determination under Sections 73 or 74 of the CGST Act can validly be issued and made in the name of a deceased taxable person.

Whether, after the death of a proprietor, the department may determine the deceased person’s tax, interest and penalty liability by issuing notice in the deceased’s name and requiring the legal heirs to respond, or whether notice must be issued directly to the legal representatives.

Whether Section 93(1)(b) of the CGST Act provides a sufficient machinery for adjudication of the liability of a deceased taxable person.

The Court applied Section 2(84) of the CGST Act, under which “person” does not include a deceased individual.

Sections 73 and 74, which prescribe the machinery for determination of tax and require a valid Show Cause Notice to the person liable.

Section 93(1)(b), which imposes liability upon the legal representative of a deceased person, in the case of discontinuance of business, to pay tax, interest or penalty out of the deceased’s estate to the extent that the estate can meet the charge.

Section 29(3), which preserves liability for periods prior to cancellation of registration, whether the dues are determined before or after cancellation.

The Court relied on Sabina Abraham v. Collector of Central Excise and Customs , (2015) 10 SCC 770, and the authorities cited in Arvind Traders v. State of Uttar Pradesh , T. Nigil v. Commissioner of GST & Central Excise , Kakali Saha v. State of West Bengal , and Gurnam Singh v. Gurbachan Kaur , for the principle that proceedings initiated against a dead person are null, non-est and void ab initio, and that the legal representative must be proceeded against in accordance with law.

Section 93(1)(b) was treated as creating substantive liability, but not as providing the procedural machinery for adjudication.

The Court distinguished between the existence of liability and the lawful procedure for determining it.

Although Section 93(1)(b) could make the legal representatives liable to the extent of the deceased’s estate, that provision did not authorise the department to issue a notice in the name of a person who was already dead.

Since the proprietor had died on 20 May 2021, the Show Cause Notice dated 8 March 2022 was issued against a non-existent person.

The petitioner’s subsequent replies could not cure the foundational defect, because the notice had not been issued to the legal representatives in their own names and they had not been properly called upon to answer the proposed liability under the statutory machinery of Sections 73 or 74.

The Court therefore held that the determination of tax against the deceased proprietor was legally impermissible, irrespective of the department’s objections regarding delayed intimation of death or belated cancellation of registration.

Accordingly, it quashed and set aside the Show Cause Notice dated 8 March 2022, the Order-in-Original dated 21 January 2025, and the recovery notice dated 8 June 2024.

The department was directed to issue a fresh Show Cause Notice in the names of the identified legal heirs within three weeks of receiving the order.

The legal heirs were directed to file comprehensive replies within three weeks of receipt of the notice, after which the authority was to provide an opportunity of personal hearing and determine the liability only to the extent that the deceased’s estate was capable of meeting the charge under Section 93(1)(b).

The adjudication was to be completed within six weeks from receipt of the replies, without the authority being influenced by the observations in the judgment.