Arvind Treaders Vs State of Uttar Pradesh And Another (Allahabad High Court
Summary: The Allahabad High Court allowed the writ petition challenging an order dated 19.7.2024 passed under Section 73(9) of the Goods and Services Tax Act, 2017, whereby a demand of Rs.2,94,649/- had been raised in the name of Arvind Agarwal.
The petitioner Neelam Agarwal, wife of deceased Arvind Agarwal, contended that Arvind Agarwal had died on 28.5.2021. The GST registration of the proprietorship firm M/s. Arvind Traders Company, which was in the name of the deceased Arvind Agarwal, had thereafter been cancelled with effect from 16.5.2021 by order dated 24.6.2022. Despite the Department being aware of the death and cancellation of registration, a show cause notice dated 16.5.2024 was issued in the name of the deceased under Section 73, followed by a reminder dated 9.7.2024. As the notices were uploaded on the portal and the GST registration had already been cancelled, the petitioner submitted that there was no occasion to access the portal. The show cause notice therefore remained unanswered and the order dated 19.7.2024 was passed raising demand against the deceased.
The respondents relied upon Section 93 of the Act and contended that recovery could be made from legal representatives even where the determination had been made after the death of the proprietor.
The Court examined Section 93, which deals with liability to pay tax, interest or penalty where a person liable to pay such amounts dies. The provision distinguishes between a situation where the business is continued after death by the legal representative or another person and a situation where the business is discontinued. In the latter case, the legal representative is liable to pay out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, including where the tax, interest or penalty is determined after the death.
The Court, however, held that Section 93 only deals with the liability to pay tax, interest or penalty and does not authorise determination against a deceased person. The provision does not provide that determination itself can be made against a dead person followed by recovery from the legal representative.
According to the Court, once the statutory provision deals with liability of a legal representative on account of the death of the proprietor, it is sine qua non that the legal representative must be issued a show cause notice and must be given an opportunity to respond before determination is made. The legal representative therefore has to be brought into the proceedings rather than the proceedings being conducted in the name of the deceased.
The Court found that, in the present case, the show cause notice, reminders and determination of tax had all been made after the death of the proprietor. The determination had consequently been made against the dead person without issuing notice to the legal representative.
The Court therefore held that the determination could not be sustained. The order dated 19.7.2024 and the show cause notice dated 16.5.2024 were quashed and set aside. At the same time, the respondents were left free to take appropriate proceedings in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. This petition is directed against order dated 19.7.2024 passed under Section 73 (9) of the Goods and Services Tax Act, 2017 (for short ‘the Act’) wherein a demand of Rs.2,94,649/- has been raised in the name of Arvind Agarwal.
2. The petitioner Neelam Agarwal, wife of deceased Arvind Agarwal has filed the petition inter alia with the submissions that Arvind Agarwal had died on 28.5.2021 and on account of his death, the GST registration of the proprietorship firm M/s. Arvind Traders Company, which was in the name of deceased Arvind Agarwal, was cancelled with effect from 16.5.2021 by order dated 24.6.2022. Whereafter a show cause notice dated 16.5.2024 was issued in the name of deceased Arvind Agarwal under Section 73 of the Act, followed by reminder dated 9.7.2024, however, as the same were uploaded on the portal and the GST registration had already been cancelled, there was no occasion for the petitioner to have accessed the said portal, the show cause notice remained unanswered which resulted in passing of the order dated 19.7.2024 raising demand against the deceased.
3. Submissions have been made that once the Department was well aware of the fact that Arvind Agarwal, proprietor of the firm has already died and the registration of the firm has already been cancelled, there was no occasion for issuing a show cause notice in the name of the deceased and as the proceedings have been conducted in the name of the deceased Arvind Agarwal, the same are void ab initio and, therefore, the order impugned deserves to be quashed and set aside.
4. Learned counsel for the respondents supported the order impugned with the aid of provisions of Section 93 of the Act. Submissions have been made that under the provisions of Section 93, the recovery can be made from the legal representatives even after the determination has been made after the death of the proprietor of the firm.
5. We have considered the submissions made by counsel for the parties and have perused the material available on record.
6. Undisputed facts are that the show cause notice, reminders and determination of tax have been made after the death of the proprietor of the firm. Provisions of Section 93 of the Act, insofar as relevant, reads as under:
“93. Special provisions regarding liability to pay tax, interest or penalty in certain cases:
(1) Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a person, liable to pay tax, interest or penalty under this Act, dies, then –
(a) if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act; and
(b) if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.”
7. A perusal of the above provision would reveal that the same only deals with the liability to pay tax, interest or penalty in a case where the business is continued after the death, by the legal representative or where the business is discontinued, however, the provision does not deal with the fact as to whether the determination at all can take place against a deceased person and the said provision cannot and does not authorise the determination to be made against a dead person and recovery thereof from the legal representative.
8. Once the provision deals with the liability of a legal representative on account of death of the proprietor of the firm, it is sine qua non that the legal representative is issued a show cause notice and after seeking response from the legal representative, the determination should take place.
9. In view thereof, the determination made in the present case wherein the show cause notice was issued and the determination was made against the dead person without issuing notice to the legal representative, cannot be sustained.
10. Consequently, the writ petition is allowed. The order dated 19.7.2024 (Annexure-1 to the writ petition) and show cause notice dated 16.5.2024 (Annexure-2 to the writ petition) are quashed and set aside. The respondents would be free to take appropriate proceedings in accordance with law.
