Section 93 permits recovery from the estate of a deceased, but the person who inherits the estate must be arrayed as a party and given an effective hearing, the Court said.

The Punjab and Haryana High Court has quashed the adjudication and first appellate orders confirming a GST demand for FY 2017-18, after finding that the show cause notice and the order had been issued against a person who had died more than three years before the proceedings began [Madhu Aggarwal, Legal Representative of Late Sh Ramphal Aggarwal v. Union of India and Others].

A Division Bench of Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor held that a valid recovery order against the estate of a deceased taxpayer can be passed only after the heir from whom recovery is proposed is made a party and heard.

The registered person had closed his business and his GST registration was cancelled on April 28, 2020. He died on May 23, 2021. A show cause notice under Section 74 of the CGST Act was nonetheless issued in his name on August 3, 2024, and the demand was confirmed and upheld in first appeal.

The Revenue defended the proceedings under Section 93(1)(b), which makes the legal representative liable to pay, out of the estate, the tax, interest or penalty due from a person whose business was discontinued, whether determined before or after his death. It also pointed out that a further appeal lay before the Appellate Tribunal under Section 112.

The Court accepted that liabilities of the deceased can be recovered from his estate, but held that the procedure had not been followed.

"In order to pass a valid order in this regard, the person who has inherited the estate of the deceased and from whom the recovery is now proposed to be made has to be arrayed as a party. An effective opportunity of hearing has also to be given to such person," the Bench observed.

It further held that the fact that the petitioner had appeared and objected to the proceedings was no substitute for a hearing, since notice had to be issued to the heir in an individual capacity for recovery from the estate in her hands.

Finding a breach of natural justice, the Court declined to relegate the petitioner to the Tribunal, and quashed the orders so that the Department could proceed afresh against the rightful heir in accordance with law.

The ruling does not extinguish the liability; it only requires the Department to restart proceedings against the legal heir with proper notice and hearing.

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