Case Law Details
Unnikrishnan R. Vs Union of India (Madras High Court)
Summary: In Unnikrishnan R. v. Union of India, the Madras High Court ruled that a demand order issued against a deceased person is invalid if the legal heirs are not continuing the deceased’s business. The case involved a writ petition filed by Mr. Unnikrishnan, the son of Mr. Radhakrishnan Pillai, who owned M/s. Chothi Enterprises and passed away in 2017. The Revenue Department had issued a demand order in 2023 for tax liabilities related to 2017-2018, despite the business not being continued by the heirs. The court observed that issuing a Show Cause Notice (SCN) to a deceased person was legally flawed. According to Section 93 of the Central Goods and Services Tax (CGST) Act, tax liabilities can only be recovered from legal heirs if they continue the business. Since the business was not continued by the heirs, the court invalidated the demand order and directed the department to issue fresh notices to the legal heirs if applicable. The ruling underscores that tax recovery from a deceased person’s estate is only possible if the legal heirs carry on the business operations.
The Hon’ble Madras High Court in the case of Unnikrishnan R. v. Union of India [W.P No. 12464 of 2024 dated June 12, 2024], held that order passed against the dead person is invalid when the business of the deceased person is not being operated by the legal heirs of the deceased person. Also, it was held that, the Department is empowered to recover the tax amount under Section 93 of the Central Goods and Services Tax Act (“the CGST Act”) if the business is being carried out by the legal heirs of the deceased person.
Facts:
Mr. Unnikrishnan R. (“the Petitioner”), filed a writ petition challenging order dated December 29, 2023 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) for the year 2017-2018. The Petitioner was the son of Mr. Radhakrishnan Pillai, the owner of ‘M/s. Chothi Enterprises’, who passed away on October 11, 2017. The Petitioner and his family as legal heirs did not continue the business. However, a Show Cause Notice (“the SCN”) was issued on September 29, 2023, in the name of the deceased dealer. The Petitioner contended that the Impugned Order against a deceased person was invalid. The Respondent argued that they had not been properly notified of Mr. Pillai’s death.
Issue:
Whether the Demand Order passed against deceased person is valid?
Held:
The Hon’ble Madras High Court in W.M.P. (MD) No. 11068 of 2024 held as under:
- Opined that, the SCN was legally invalid since it was directed at a deceased person. Also, the Petitioner being legal heir has not continued the business and therefore could not be liable for the tax demand. However, if the Petitioner continues the business, tax demand could be raised and recovered under Section 93 of the CGST Act.
- Held that, the Impugned Order is set aside, and directed the Respondent to issue common notice to the Petitioner representing the interest of the other legal heirs/legal representatives of the deceased dealer
Our Comments:
Circular No. 96/15/2019-GST dated March 28, 2019 provides clarification relating to transfer of ITC in case of death of sole proprietor interlalia stating that as per Rule 41(1) of the CGST Rules, a registered person shall file FORM GST ITC-02 electronically on the common portal with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason. In case of transfer of business on account of death of sole proprietor, the transferee / successor shall file FORM GST ITC-02 in respect of the registration which is required to be cancelled on account of death of the sole proprietor. FORM GST ITC-02 is required to be filed by the transferee/successor before filing the application for cancellation of such registration. Upon acceptance by the transferee / successor, the un-utilized input tax credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
Relevant Provision:
Section 93 of the CGST Act:
(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.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this Writ Petition, the petitioner has challenged the impugned order dated 29.12.2023 passed by the third respondent in GSTIN: 33ABBPP2462P1ZF/2017-18, and prayed for a direction to the second, third and fourth respondents not to proceed further with recovery proceedings pursuant to the impugned order.
2. Mr.G.Rajaraman, learned Central Government Standing Counsel takes notice for the first respondent. Mr.R.Sureshkumar, learned Additional Government Pleader, takes notice for the second to fourth respondents. With their consent, this Writ Petition is taken up for final disposal at the time of this admission.
3. The petitioner is the son of deceased dealer Mr.Radhakrishnan Pillai who was running a business concern under the name and style of ‘M/s.Chothi Enterprises’ at Anakarai, Kulapuram, Kanyakumari District and tragically died on 11.10.2017 under mysterious circumstances. However, the third respondent issued Show Cause Notice under Section 73(1) of the TNGST Act, 2017 on 29.09.2023 in the name of the deceased dealer Mr.Radhakrishnan Pillai.
4. The case of the petitioner is that although the petitioner and other members of the family are the legal heirs/legal representatives of the deceased dealer Mr.Radhakrishnan Pillai, they are not carrying on the business carried on by the deceased Mr.Radhakrishnan Pillai. It is submitted that the impugned order dated 29.12.2023 confirming the demand proposed in the Show Cause Notice dated 29.09.2023 is non-est in law as it has been passed against the dead person.
5. This Writ Petition is opposed by both the learned Central Government Standing Counsel for the first respondent and the learned Additional Government Pleader for the second to fourth respondents stating that there was no proper intimation about the death of the dealer Mr.Radhakrishnan Pillai. It is therefore submitted that not only the Show Cause Notice in Form GST DRC-01 was issued on 30.09.2023 followed by the Show Cause Notice dated 29.09.2023 issued under Section 73(1) of the TNGST Act, 2017, but also a Notice in Form GST ASMT-10 was issued on 13.06.2023, to which also, neither the petitioner nor his family members have responded.
6. It is further submitted that in the affidavit, the petitioner has stated that they have orally informed the officers about the death of the dealer telephonically. It is therefore submitted that there is no merits in the challenge to the impugned order.
7. The learned Additional Government Pleader for the second to fourth respondents submitted that the petitioner may be given liberty to file statutory appeal before the Deputy Commissioner (ST) (GST) (Appeal) under Section 107 of the TNGST Act, 2017 by condoning the delay and therefore prayed for dismissal of this Writ Petition with the
above liberty.
8. I have considered the arguments advanced by the learned counsel for the petitioner, the learned Central Government Standing Counsel for the first respondent and the learned Additional Government Pleader for the second to fourth respondents.
9. There is no dispute that the dealer Mr. Radhakrishnan Pillai has died on 11.10.2017 and that the petitioner is one of his legal heirs/legal representatives along with his mother R.Sujatha aged about 62 years, his sister Sreelekshmi aged about 33 years and his grand-mother Nalinakshi Amma aged about 84 years.
10. The order that has been passed against the dead person is non-est in law. If the petitioner is carrying on the business of the deceased person, then, the remedy is available to the Department to proceed against the petitioner under Section 93 of the TNGST Act, 2017. It appears to be that the petitioner is not carrying on the business of the deceased person.
11. Be that as it may, since the impugned order has been passed against the dead person, the impugned order is quashed by directing the respondents to issue a common notice to the petitioner representing the interest of the other legal heirs/legal representatives of the deceased dealer Mr. Radhakrishnan Pillai, within a period of 30 days from the date of receipt of a copy of this order and thereafter proceed in the manner known to law, in case the petitioner is carrying on the business of the deceased dealer Mr. Radhakrishnan Pillai.
12. With the above direction, this Writ Petition stands disposed of. No costs. Consequently, connected Miscellaneous Petitions are closed.
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