Legal Heir Not Liable For GST Dues Without Proof Of Business Continuity: Jharkhand High Court

The Jharkhand High Court has recently held that tax liability under the Central Goods and Services Tax (CGST) Act, 2017, cannot be extended upon a legal heir in the absence of evidence showing that the heir continued the business of the deceased proprietor. 

A Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice Rajesh Shankar while delivering the ruling clarified, “In the absence of any material referred to by the said respondent as to on what basis it is held that the petitioner was continuing the business in the name of his father's proprietary concern after his father's death in spite of the petitioner obtaining a fresh registration in his own name on 24.03.2018, we are of the opinion that the impugned order dt. 28.11.2022 is perverse, based on no evidence and cannot be sustained.”

The above ruling was made in a writ petition filed by one filed by Rishi Shangari, challenging an order passed by the Assistant Commissioner, CGST, Jamshedpur.

As per the factual matrix of the case, the petitioner's father had obtained a certificate of registration under the GST Act, who then passed away and thereafter, the petitioner applied for registration and another certificate of registration was issued in the same year in the same proprietary concern's name.

Despite this, an order was passed in 2022 under GST DRC-07 by the State Tax Officer, Jamshedpur for the tax period April 2018 to March 2019 with regard to the father of the petitioner, and another order on the same date for the tax period from April 2019 to March 2020.

Furthermore, a summon under Section 70 of the CGST Act was served upon the deceased, after which the petitioner filed a reply enclosing the death certificate. He pointed out that there cannot be any proceeding initiated against a dead person after his death and requested to waive the liability.

However, the Assistant Commissioner issued the impugned order quoting section 93(1)(a) of the CGST Act, 2017 according to which if the business is carried on by a person's legal representative after his death, the legal representative would be liable to pay tax, interest or penalty.

It was contended by the petitioner that he had not continued the business of his father, but had obtained a separate registration in his own name. The High Court found merit in this contention and found that the order lacked any evidentiary basis to hold that the petitioner continued the business of his late father.

“3rd respondent did not provide details of any material evidence to show as to how the petitioner was said to be continuing business of the father's proprietary concern having himself obtained a fresh registration on 24.03.2018,” the Court said.

The High Court set aside the order, ruling, “the impugned order dt. 28.11.2022 is perverse, based on no evidence and cannot be sustained.”

Accordingly, the writ petition was allowed 

Case Title: Rishi Shangari Versus UOI