CGST Act Permits Tax Liability To Be Determined After Death Of Person: Delhi High Court

The Delhi High Court has held that the Central Goods and Services Tax (CGST) Act permits tax, interest, or penalty liability to be determined even after the death of the person against whom the underlying liability arises.

The Division Bench of Justices Anil Kshetarpal and Vimal Kumar Yadav held that Section 93 of the CGST Act does not require adjudicatory proceedings to have commenced during the lifetime of the deceased for liability to be determined after his death.

“The provision preserves liabilities attributable to the deceased's lifetime conduct for lawful determination and satisfaction from his estate. Death creates the need for someone to represent that estate,” it observed.

The Court was dealing with a petition filed by Jaiwanti, the widow and legal representative of late Ankit Dabas, challenging proceedings initiated against her in relation to alleged acts committed by her deceased husband.

The Department had issued a Show Cause Notice (SCN) on July 31, 2024, more than three years after Dabas died on May 6, 2021. The notice proposed penalties against Jaiwanti under Section 122(3)(a) of the CGST Act by invoking Section 93, in her capacity as the legal representative of her late husband.

The proceedings arose from a DGGI investigation concerning alleged fraudulent availment and passing on of Input Tax Credit and IGST refund on the strength of invoices without corresponding supply of goods.

Petitioner argued that the expression “is determined after his death” in Section 93 permitted only completion of proceedings that had already commenced during the deceased's lifetime. She contended that fresh proceedings proposing a penalty for alleged acts of her deceased husband could not be initiated more than three years after his death.

Rejecting this interpretation, the High Court noted that Section 93 expressly contemplates liability being “determined after his death” and contains no qualification that such determination must arise from proceedings commenced during the deceased's lifetime.

“The CGST Act does not make issuance of such a notice during lifetime a condition precedent to a determination after death,” it held.

The Court clarified that Section 93 is not an independent penal provision against a legal representative. Rather, Section 122 supplies the substantive penalty, while Section 93 governs the manner in which the liability may be enforced following the death of the person to whom the underlying conduct is attributed.

In cases where the business has been discontinued, the Court noted, Section 93(1)(b) confines the legal representative's liability to the estate of the deceased and only to the extent that the estate is capable of meeting the charge.

The Court also rejected Petitioner's constitutional challenge to Section 93(1)(b). It observed that the provision does not deem the legal representative to have committed the alleged wrong. Rather, it confines payment to the estate‟s capacity to meet the charge

“The underlying contravention and the conditions of representative liability must still be established by the adjudicating authority,” it said.

The Court acknowledged that the death of the person possessing first-hand knowledge may affect the explanation available to the legal representative. However, it noted that Section 126(3) requires an effective opportunity of hearing and that the representative must be supplied with the relied-upon material and permitted to contest the alleged contravention, the statutory basis and the proposed amount.

“Inability to give a personal account of the deceased's affairs cannot be treated as an admission,” the Court observed.

In the present case at hand however, the Court noted an apparent inconsistency in the demand order: one clause imposed a penalty of ₹1.5 lakh upon Petitioner, while another stated that no penalty was being imposed upon her.

The Court left the issues open for consideration by the appellate authority and granted Petitioner four weeks to file an appeal under Section 107 of the CGST Act.

For Petitioner: Advocates Bharat Bhushan, Nidhi Gupta and Anuay Mishra

For Respondents: Advocate Raj Kumar Yadav & Preeti Gothwal, Monica Benjamin, SSC with Laiba Arif and Prerika Narang, for R-2 and R-4. Ms. Vaishali Gupta, Panel Counsel (Civil) GNCTD with Ms. Rashi Aggarwal, Adv. for R-3.