GST order against deceased person quashed; fresh notice to legal heirs ordered

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Case Name:

T.Nigil v. The Commissioner of GST & Central Excise (Appeals) & Others (High Court of Madras)

W.P(MD)No.20626 of 2024 and W.M.P(MD)No.17484 of 2024

Date: 03rd September 2024

Key Takeaways

• No assessment against deceased: Tax assessment or adjudication orders cannot be passed in the name of a dead person under the GST Act.
• Legal heirs’ liability: If the business is continued by legal heirs, or even if discontinued, the liability can be fastened on the legal heirs, but only after following due process and issuing notice to them.
• Section 93(1) of CGST Act, 2017: This section governs the liability of legal heirs for tax dues of a deceased person, but does not allow proceedings to be continued in the name of the deceased.
• Participation doesn’t cure defect: Even if legal heirs participate in proceedings, it does not validate an order passed against a dead person.
• Fresh proceedings allowed: The department can issue a fresh notice to the legal heirs and proceed as per law.

Issue

Can tax assessment or adjudication proceedings under the GST Act be validly continued and orders passed in the name of a person who has died, after the authorities have been informed of the death?

Facts

• The petitioner, T.Nigil, challenged an order in appeal (No.13/2023-MDU-GST-COMMR-APP, dated 30.10.2023) which affirmed an original order dated 02.01.2023.
• The entire GST adjudication process, starting from the show cause notice dated 28.03.2022, was conducted in the name of the petitioner’s father, who had died on 19.05.2021.
• The authorities were informed about the death, but still proceeded to pass orders in the deceased’s name.
• The petitioner argued that such proceedings are a nullity in law.

Arguments

Petitioner (T.Nigil)

• The assessment and adjudication were conducted in the name of a dead person, which is legally impermissible.
• Cited that under the GST Act, proceedings must be against a living person or the legal heirs, not the deceased.
• Participation by legal heirs in the proceedings does not cure this fundamental defect.

Respondents (GST Authorities)

• Relied on Section 93(1) of the Central Goods and Service Tax Act, 2017, which deals with the liability of legal heirs for tax dues of a deceased person.
• Sought liberty to issue a fresh notice to the legal heirs if the court found the proceedings defective.

Key Legal Precedents

• Section 93(1) of the Central Goods and Service Tax Act, 2017:
• (a) If the business is continued by legal representatives, they are liable for tax dues.
• (b) If the business is discontinued, legal representatives are liable to the extent of the estate.
• The section does not allow assessment in the name of a dead person; it requires proceedings to be against legal heirs.
• R.Unnikrishnan Vs. Union of India, 2024 (21) CENTAX 47 (Mad.):
• Held that orders passed against a dead person are non-est (invalid) in law.
• Directed authorities to issue notice to legal heirs and proceed as per law.

Judgement

• The court set aside the impugned order, holding that assessment in the name of a dead person is a substantive defect and cannot be cured by participation of legal heirs.
• The court granted liberty to the GST authorities to issue a common notice to the legal heirs of the deceased within 30 days and proceed according to law.
• No order as to costs; connected miscellaneous petition closed.

FAQs

Q1: Can tax authorities issue orders in the name of a deceased person?

A: No, any order passed in the name of a dead person is invalid. Proceedings must be against the legal heirs or representatives.

Q2: What should tax authorities do if the taxpayer dies during proceedings?

A: They must issue a fresh notice to the legal heirs or representatives and continue proceedings against them, as per Section 93(1) of the CGST Act, 2017.

Q3: Does participation by legal heirs in proceedings validate an order against a dead person?

A: No, participation does not cure the defect. The order remains invalid.

Q4: What happens next for the legal heirs?

A: The authorities can issue a new notice to the legal heirs, who will then have an opportunity to respond and participate in the proceedings.

Q5: What is the significance of this judgment?

A: It reinforces that tax proceedings must follow due process and cannot be continued in the name of a deceased person, ensuring legal heirs are properly notified and given a chance to be heard.