Court affirms that fresh GST proceedings can be initiated against legal heirs under Section 93 of the CGST Act, even if no proceedings were started during the deceased's lifetime.
News Report: In a significant ruling, the Madras High Court, Madurai Bench, presided by Justice D. Bharatha Chakravarthy, has held that fresh GST assessment proceedings can be initiated against legal heirs of a deceased taxable person under Section 93 of the Central Goods and Services Tax Act, 2017 (CGST Act), even if the business has been discontinued and no proceedings were initiated during the lifetime of the deceased.
The case was brought forth by petitioner V. Damayanti, challenging an order passed under Section 74 of the CGST Act, which determined a tax liability of Rs. 3,42,355 plus interest and penalty against her as the legal heir of her deceased husband, V. Vasudevan, who was the proprietor of M/s. Vasu Chemicals. The business had been discontinued following Vasudevan's death in 2019, and Damayanti contended that no proceedings had been initiated during her husband's lifetime, thus questioning the legitimacy of proceedings against her.
The petitioner argued that Section 93 should be read in harmony with Sections 73 and 74, which require notice to the "person chargeable with tax" before determining liability. Her counsel emphasized that no such notice was given during her husband's lifetime, suggesting that Section 93 should not authorize new proceedings against a legal heir after the taxable person's death.
Conversely, the respondent, the Superintendent of GST and Central Excise, represented by Senior Standing Counsel R. Gowri Shankar, contended that Section 93 explicitly provides for the liability of legal heirs, allowing for tax determination and recovery even after the taxable person's death. The counsel asserted that the CGST Act's provisions should not be conflated with those of the Income Tax Act, which the petitioner had relied upon in her argument.
Justice Chakravarthy, in his judgment, clarified that Section 93 indeed allows for the determination of liability posthumously and that the expression "person chargeable with tax" under Section 74 encompasses legal heirs in such circumstances. The court acknowledged the statutory framework of the CGST Act, emphasizing that the legal heir's liability is limited to the extent of the estate inherited.
The court further referenced prior Supreme Court rulings to underscore the legislative intent of the CGST Act, highlighting that the statute's language must be adhered to without imposing external limitations.
The ruling reaffirms the legal position that while legal heirs can be pursued for tax liabilities post the original taxpayer's demise, their liability is restricted to the assets inherited from the deceased. This judgment serves as a precedent, ensuring that the tax authorities have the statutory backing to initiate proceedings against legal heirs under the CGST Act, thus maintaining the continuum of tax liability across generations.
Bottom line:-
Under Section 93 of the Central Goods and Services Tax Act, 2017, fresh assessment proceedings can be initiated against legal heirs of a deceased taxable person even if the business has been discontinued and no proceedings were initiated during the lifetime of the deceased. However, the liability of legal heirs is limited to the estate inherited by them.
Statutory provision(s): Central Goods and Services Tax Act, 2017, Sections 73, 74, 74-A, and 93.
