Facts of the Case

The petitioner, Smt. Usha Gupta (widow of Late Sh. Surender Kumar Gupta), challenged a Show Cause Notice (SCN) dated 01.08.2024 issued under Section 74 of the CGST Act to M/s S.K. Gupta & Co., a sole proprietorship concern.

It was undisputed that:

  • The sole proprietor, Mr. Surender Kumar Gupta, had already expired prior to issuance of the SCN.
  • The SCN was issued in the name of the deceased individual.

The petitioner approached the Delhi High Court seeking quashing of the impugned SCN on the ground that it was issued to a non-existent person. 

Issues Involved

  1. Whether a Show Cause Notice issued under Section 74 CGST Act to a deceased person is legally sustainable?
  2. Whether proceedings for tax recovery can continue against legal representatives under Section 93 CGST Act?
  3. Whether issuance of SCN must mandatorily be addressed to the legal representative instead of the deceased taxpayer? 

Petitioner’s Arguments

  • The impugned SCN was issued to a deceased person, rendering it void ab initio.
  • A sole proprietorship has no separate legal identity from its proprietor; hence, after the death of the proprietor, the entity ceases to exist.
  • Any proceedings initiated against a dead person are legally unsustainable and non-est. 

Respondent’s Arguments

  • The petitioner continued the business of the deceased proprietor.
  • Under Section 93 of the CGST Act, liability for tax, interest, or penalty survives and can be recovered from legal representatives.
  • Therefore, proceedings were justified to recover dues of the deceased taxpayer. 

Court’s Findings / Order

  • The Court reaffirmed that a sole proprietorship has no separate legal existence apart from the proprietor.
  • Since the proprietor had expired, the SCN was issued to a non-existent person, making it legally invalid.
  • While Section 93 allows recovery from legal representatives, the SCN must be issued to the legal representative or the person carrying on the business, not the deceased.
  • Reliance was placed on Unnikrishnan R & Ors v. Union of India & Ors (2024), wherein it was held that orders passed against dead persons are non-est in law.

Final Order

  • The impugned Show Cause Notice dated 01.08.2024 was set aside.
  • Liberty was granted to the department to issue a fresh notice to the legal representative or appropriate person in accordance with law. 

Important Clarification by Court

  • The judgment does not bar the department from initiating fresh proceedings.
  • Authorities must ensure that:
    • Proceedings are initiated against legal representatives or persons continuing the business, and
    • Not against a deceased taxpayer.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB23092024CW116342024_173018.pdf 

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