GSTAT Quashes Pre-Death GST Order Against Pharma Dealer, Citing No Post-Death Notice To Heir Or Inquiry Into Estate

The appellant, a proprietorship dealing in pharmaceuticals, challenged an input tax credit (ITC) demand of ₹1,12,264 for FY 2017–18 arising from a mismatch between GSTR-3B and GSTR-2A.

The proprietor explained that suppliers had mistakenly reported the relevant supplies as B2C rather than B2B and submitted that the purchases were genuine and the suppliers had paid the tax.

The original order was issued on 27 June 2022 and the first appellate order on 26 November 2022; the proprietor died on 17 December 2022. The business was discontinued, and the GST registration was cancelled with effect from 1 April 2023. The proprietor’s son, claiming to be the legal heir, filed the second appeal.

The Tribunal recorded differing dates for the second appeal: paragraph 5 states 26 February 2026, while paragraphs 7 and 9 state 12 June 2026.

Section 93(1)(b) of the CGST/KGST Act provides that where a taxpayer dies and the business is discontinued, the legal representative is liable for tax, interest or penalty due from the deceased only out of the deceased’s estate, and only to the extent that the estate can meet the charge; the liability may be determined before or after death.

The Tribunal also referred to authorities holding that proceedings concerning a deceased sole proprietor require action against the legal representative, with notice and an opportunity to respond, and that recovery in a discontinued-business case is limited to the inherited estate.

On ITC, the Revenue invoked Section 155, under which the claimant bears the burden of establishing eligibility, including by invoice-wise reconciliation.

The Tribunal’s merits discussion focused on the supplier certificates and payment of tax.

The Tribunal found that the business had not continued after the proprietor’s death and that the respondent had neither issued notice to the legal heir nor made an inquiry into whether an estate existed from which the demand could be recovered.

It therefore held that the statutory procedure under Section 93(1)(b) had not been followed and that the proceedings could not stand.

Separately, it accepted the supplier certificates confirming payment of tax and explaining the B2C/B2B reporting error; it noted that the Revenue had not countered that evidence and found no reason to disbelieve it.

It also found the appellant eligible for the disputed ITC on the evidence before it.

The Tribunal quashed and set aside the first appellate order dated 26 November 2022 and allowed the appeals with consequential relief.