GST Proceedings Maintainable Against Heirs Even Without Action During Taxpayer's Lifetime: Madras HC

The Madurai Bench of the Madras High Court on 16 June held that Section 93 of the Central Goods and Services Tax Act, 2017 permits GST authorities to initiate proceedings against the legal heirs of a deceased taxpayer even if no proceedings were initiated during the taxpayer's lifetime.

Justice D. Bharatha Chakravarthy dismissed a writ petition filed by V. Damayanti, wife of the late V. Vasudevan, proprietor of Vasu Chemicals, challenging proceedings initiated after Vasudevan's death. He held:

"Even in cases where the business is discontinued, the statute authorises recovery from the legal heir to the extent that the estate inherited by him is capable of meeting the liability. Significantly, Section 93 expressly contemplates a situation where the tax, interest or penalty is determined after the death of the taxable person,"

Damayanti challenged an Order-in-Original passed under Section 74 of the CGST Act for the financial year 2018-19. She contended that after her husband's death on 5 March 2019, the business had been discontinued and the GST registration had subsequently been cancelled.

She argued that no proceedings had been initiated during her husband's lifetime and therefore fresh proceedings could not subsequently be initiated against legal heirs. Further, Section 93 of the CGST Act, which deals with liability of legal heirs, must be read harmoniously with Section 74 of the Act.

According to her, proceedings under Section 74 can only be initiated against a "person chargeable with tax," and a legal heir who had neither continued the business nor undertaken taxable activities could not fall within the scope of that expression.

The Revenue, however, contended that Section 93 specifically creates liability upon legal representatives and expressly contemplates situations where tax, interest or penalty may be determined after the death of the taxable person.

Accepting the Revenue's submissions, the High Court observed that Section 93 of the CGST Act clearly provides for liability even where tax dues are determined after the death of a taxable person. It held:

"even where the tax, interest or penalty that is determined after the death of the taxable person is also the statute that contemplates recovery of the same from the legal heirs in the manner provided under Section 93 of the CGST Act,"

It noted that the expression "person chargeable with tax" under Section 74 cannot be interpreted narrowly so as to exclude legal heirs upon whom the statute imposes liability.

Further, the Bench observed that once the statute expressly permits tax liability to be "determined after his death," such determination necessarily includes the entire adjudicatory process, including issuance of notices and initiation of proceedings.

Rejecting the petitioner's argument seeking a restrictive interpretation of Section 93, it held that courts cannot read limitations into a taxing statute where the Legislature has consciously omitted them. Answering the issue, it held:

"even in a case where the business of the deceased taxable person has been discontinued and no show cause notice or assessment proceedings had been initiated during his lifetime, fresh proceedings may nevertheless be initiated against the legal heir under Section 73, 74 or 74-A of the CGST Act, 2017 in view of section 93 of the CGST Act."

The Bench, however, clarified that where the business has been discontinued, recovery from legal heirs would remain limited to the extent of the estate inherited by them and only to the extent such estate is capable of meeting the tax liability.

Accordingly, the High Court dismissed the writ petition.

For Petitioner: Mr. Adithya Reddy

For Respondent: Mr. R.Gowri Shankar, Senior Standing Counsel