General Trading Company Vs State of U.P. (Allahabad High Court)
In a significant ruling for proprietorship firms, the Allahabad High Court has declared that Goods and Services Tax (GST) proceedings initiated against a deceased proprietor are not sustainable. The court, in the case of General Trading Company vs. State of U.P. and Others, allowed a writ petition filed by the son and legal heir of the late proprietor, setting aside a tax liability imposed on the firm. This decision aligns with the principle that legal proceedings cannot be conducted against an individual who has passed away, particularly when the legal heir was not duly notified or heard.
The case involved M/S General Trading Company, a proprietorship firm whose proprietor, Prabha Devi, died on March 16, 2019. Despite her demise, the GST authorities initiated proceedings against the firm on September 26, 2023, for the 2017-18 financial year; on December 22, 2023, for 2018-19; and on May 14, 2024, for 2019-20. It was undisputed that these proceedings were taken out against a deceased person, who was exclusively in charge of the firm’s operations. The business had reportedly ceased operations after Prabha Devi’s death.
The tax liability for the proprietorship firm was subsequently imposed upon the petitioner, Prabha Devi’s son and legal heir. The petitioner asserted that he was never issued any notice by the revenue department regarding the firm’s outstanding dues. He contended that as a legal heir, he was entitled to an opportunity of hearing before any tax liability could be levied upon him under the GST Act.
