GST Proceedings After Death of Proprietor: Continuity, Liability of Legal Heirs, and Judicial Consensus

GST Proceedings After Death of Proprietor: Continuity, Liability of Legal Heirs, and Judicial Consensus

1. Introductory

In India’s business ecosystem, sole proprietorships are widespread—especially among family-run enterprises and religious societies. But when the proprietor passes away, a critical legal question arises: Can GST assessment proceedings continue against their legal heirs?

This article examines the issue through the lens of GST law and judicial precedents—drawing from the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the decisions of various High Courts under the GST regime. The discussion brings into focus the legal maxim “actio personalis moritur cum persona”—a personal action dies with the person—unless specifically preserved by statute.

2. What the Tribunals Say (CESTAT Rulings)

i Shri Gurudayal Singh v. Patna-I Commissionerate – CESTAT,  Kolkata

• • Service Tax Appeal No. 75066 of 2024, decided on April 29, 2024
  • Facts: Service tax demand raised against a deceased assessee’s spouse.
  • Held: Legal heirs cannot be saddled with liability unless they continue the business.
  • Principle: Proceedings abate upon death; liability does not transfer automatically.

Although these cases arose under the erstwhile Service Tax regime, their reasoning continues to guide interpretation under GST law where analogous circumstances arise.

ii. Manish Mehta (on behalf of the late Pushpa Mehta) vs Commissioner, Central Excise & GST, Jaipur – CESTAT Delhi

• • • Appeal No.: Service Tax Appeal No. 50422 of 2021 decided on Oct 17, 2025
    • Facts: A show cause notice was issued under service tax law. The sole proprietor died before adjudication. The authority passed an order against the legal heir.

• • • Held: Proceedings cannot continue against the legal heir. The order was declared void ab initio.
    • Quote: “The order passed by the Adjudicating Authority is void ab initio and unsustainable.”

The Bench relied, intyer alia, on the decision in Shri Gurudayal Singh v. Patna-I Commissionerate (supra).

3. GST Law: Codified Clarity

GST law provides explicit statutory guidance, unlike older tax regimes.

♦ Section 85 – CGST Act, 2017

• • • If the business is transferred or continued, the successor is liable for outstanding dues.
    • If the business is discontinued, liability is limited to the estate of the deceased—not personal assets of the heir.

4. Comparative Table: CESTAT Ratio vs GST Law

5. Statutory background under GST law

Section 93 – Liability of Legal Representatives

Title: Special provisions regarding liability to pay tax, interest or penalty in certain cases

Essence: Section 93 governs the liability of legal representatives when a taxable person dies.

Key Provisions:

• If the business is discontinued after death, the legal representative is liable only to the extent of the estate
• If the business is continued, the legal representative is deemed a taxable person and is liable for all dues (tax, interest, penalty) of the deceased.
• Proceedings can be initiated or continued against the legal representative, but not in the name of the deceased.

Judicial Alignment: High Courts [e.g., Unnikrishnan (infra) . and Rishi Shangari (infra)] have consistently held that:

• Notices issued in the name of a deceased person are void ab initio.
• Liability must be limited to the estate, unless continuity is proven.

Section 83 – Provisional Attachment to Protect Revenue

Title: Provisional attachment to protect revenue in certain cases

Essence: Section 83 empowers the Commissioner to provisionally attach property, including bank accounts, during the pendency of proceedings under Chapters XII, XIV, or XV.

Key Provisions:

• Attachment can be made after initiation of proceedings under Sections 62, 63, 64, 67, 73, or 74.
• The order must be in writing and ceases after one year unless renewed.
• The purpose is to safeguard government revenue, not to penalize.

Relevance to Legal Heirs:

• If the deceased’s estate is under assessment, provisional attachment may be invoked only against the estate, not against the personal assets of legal heirs.
• Misuse of this provision against unrelated heirs may be challenged as violative of natural justice.

6. Views of High Courts under GST law : Recent decisions

(i) Madras HC in Unnikrishnan R. v. Union of India,  W.P No. 12464 of 2024, decided on June 12, 2024

• • Brief Facts:

The petitioner’s father, a sole proprietor registered under GST, passed away in 2022.

The GST department issued a demand order in 2023 in the name of the deceased.

The petitioner had not continued the business and had applied for cancellation of registration.

• Held:
  • A demand order passed against a deceased person is invalid if the business is not continued by the legal heirs.
  • The department may recover dues only if the business is continued by the heirs under Section 93 of the CGST Act.
• Impact: Reinforces that liability does not automatically transfer unless business continuity is proven.

(ii) Jharkhand High Court in Rishi Shangari v. Union of India , W.P. (T) No. 523 of 2023, decided on April 15, 2025

Brief facts

√ he petitioner’s mother, a GST-registered sole proprietor, died in 2021.

√ The petitioner obtained a new GST registration and continued a similar line of business.

√ The department issued a demand notice for past dues of the deceased, treating the petitioner as a successor.

Held:

♦ Legal heirs are not liable for GST dues unless there is concrete evidence of continuing the deceased’s business.

♦ Even separate registration by the heir does not imply continuity unless linked to the deceased’s enterprise.

7. Line of thinking of the High Courts

(a)Madras High Court – Unnikrishnan R. v. Union of India (supra)

• • The Court emphasized that tax liability cannot survive the death of a sole proprietor unless the legal heir continues the business.
  • It held that issuance of demand against a deceased person is legally untenable, and any such order is void ab initio.
  • The Court interpreted Section 93 of the CGST Act narrowly, limiting liability to the extent of the estate inherited, not personal assets or unrelated successors.

(b) Jharkhand High Court – Rishi Shangari v. Union of India (supra)

• • The Court focused on the requirement of factual continuity: liability under Section 85 arises only if the business is transferred or continued.
  • It rejected the notion that similarity of business or familial connection implies succession.
  • The Court insisted on documentary evidence of business transfer, stating that new GST registration alone is insufficient to establish liability for past dues.

(c) Consistent judicial approach:

Together, these judgments reflect a consistent judicial approach:

Tax liability under GST is not hereditary—it must be grounded in statutory provisions and proven business continuity.

Key Takeaways:

• Notices issued in the name of a deceased person are void.
• Liability of heirs arises only upon business continuity.
• Estate-limited liability under s. 93, not personal.
• CBIC Circular 96/15/2019 provides procedural clarity.
• Ensure timely cancellation and ITC transfer to avoid exposure.

Judicial Consensus Across High Courts on GST Liability of Legal Heirs

This table reflects a consistent judicial approach: GST liability does not pass by inheritance—it must be supported by statutory provisions and factual continuity of business.

8. Supreme Court Position

As of the date of writing this article, no reported Supreme Court decision directly addresses GST liability of legal heirs post-death of a sole proprietor. However, the High Court rulings align with the statutory framework under:

• Section 93 of CGST Act (liability of legal representative)
• Section 85 of CGST Act (transfer of business)
• CBIC Circular No. 96/15/2019-GST

These provisions collectively affirm that liability is conditional, not automatic.

9. CBIC Circular No. 96/15/2019-GST (Transfer of ITC to legal heir in case of death of sole proprietor)

This circular can be accessed at https://cbic-gst.gov.in/pdf/circular-cgst-96.pdf

> Legal heirs must:

>  File GSTR-10 (final return)

>   Apply for cancellation of registration

> Use Form ITC-02 to transfer Input Tax Credit if business is continued

Key Clarifications:

i. Transfer of Business:

♦ Treated as a “transfer of business” under Section 18(3) of the CGST Act.

♦ Requires new registration by the successor.

ii. Transfer of ITC:

♦ Unutilized ITC can be transferred using Form GST ITC-02.

♦ The transferee must accept the ITC in the portal.

iii. Cancellation of Registration:

♦ Legal heir must apply for cancellation citing “death of proprietor” under Rule 20.

iv. Final Return:

♦ GSTR-10 must be filed by the legal heir.

Practical Impact:

• The circular provides a procedural roadmap for legal heirs.
• It ensures compliance continuity while respecting the legal boundaries of liability.

Practical Guidance for Legal Heirs

1. If business is continued:

♦ Apply for new GST registration

♦ Transfer ITC via Form ITC-02

♦ File regular returns

2. If business is discontinued:

♦ File GSTR-10

♦ Apply for cancellation of registration

♦ Respond to any notices with proof of death and closure

10. Cultural Resonance

In Tamil Nadu as well as several other States, where sole proprietorships often form the backbone of religious societies, temple festivals, and community-based enterprises, clarity on succession and liability is essential. Legal heirs—sons, daughters, and spouses—must be aware of both their rights and their responsibilities. GST law upholds this balance by respecting the sanctity of succession while firmly defining the boundaries of liability.

11. Concluding Thought

The passage from proprietor to heir is never only about inheritance—it is a moment where law meets life. GST law recognizes that loss should not be tangled in litigation. It provides a structured path where closure, both personal and procedural, can coexist.

The message from the CESTAT and High Courts is clear: tax laws must know when to stop at the edge of life. Legal heirs may inherit memories and values, but not liabilities beyond the estate. In this way, GST reaffirms that even in taxation, justice must remain humane.