Gujarat High Court Quashes GST Demand Against Deceased Proprietor, Says Legal Heir Must Be Properly Heard

The Gujarat High Court has held that GST proceedings initiated against a deceased taxpayer cannot be sustained when the legal heir was neither made a noticee nor given a meaningful opportunity to respond, quashing proceedings initiated against a proprietor who had died several years earlier.

A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati allowed a petition filed by Ushaben Kalpeshbhai Patni, the wife of the deceased proprietor, Kalpeshbhai Ramubhai Patni, and quashed the consequential demand order passed against him. The judges observed:

“It is true that the respondent authority was not aware about the death of the husband of the petitioner, who was connected with the business activities of the proprietorship. However, the petitioner, being a housewife, was not even remotely connected with the business and was unaware of the niceties of the GSTN portal.”

Kalpeshbhai Ramubhai Patni, who was carrying on business as Shivam Trading Co., died on 3 May 2021. His GST registration was subsequently cancelled on 16 July 2021.

Despite this, the Department issued a Section 73(5) intimation on 14 June 2024 and a show cause notice on 2 July 2024, proposing a demand of Rs. 28.49 lakh for the financial year 2020-21, both in the name of the deceased. The proceedings eventually culminated in an order dated 1 February 2025 confirming the proposed demand.

The Department submitted that several subsequent notices had been issued and that notices were also affixed at the business premises. It also submitted that it had not been aware of the taxpayer's death when the initial proceedings were commenced.

The petitioner, however, submitted that she was a housewife with no involvement in the business and had no knowledge of the proceedings conducted through the GST portal.

The Court noted that the petitioner had not herself been carrying on the deceased's business and had not been brought into the proceedings as the person against whom the Department sought to recover the outstanding liability.

It held that the mere continuation of proceedings through the GST portal in the name of the deceased could not cure this fundamental defect. The Department's initial lack of knowledge about the taxpayer's death could not justify sustaining proceedings subsequently conducted against a person who was no longer alive.

The Bench distinguished between the underlying tax liability and the validity of the proceedings through which the Department sought to recover it. While the proceedings initiated in the deceased's name could not be sustained, the Revenue remained free to take appropriate action against the legal heir in accordance with the applicable statutory procedure. It held:

“Thus, in wake of the aforesaid facts, since the proceedings are initiated against the dead person, we quash and set aside the show cause notices as well as the impugned orders passed thereafter with a clarification that it will be open for the respondent to initiate proper proceedings in accordance with law against the petitioner for the outstanding demand.”

The judges quashed the show cause notices and consequential demand order dated 1 February 2025, while permitting the Department to initiate proper proceedings against the petitioner as legal heir in accordance with law.

Accordingly, the High Court allowed the petition and made the Rule absolute, with no order as to costs.

Counsel for the Petitioner: Krutarth K. Desai and Abhay Y. Desai, Advocates

Counsel for the Respondent: Tanushree Shrimal, AGP