Madras High Court Clarifies Legal Heirs’ Liability for GST Dues and Remits Ex Parte Assessment Orders for Fresh Consideration

Background and Context
The present writ petitions were heard as part of a larger batch challenging proceedings under Section 74 of the GST enactments. The petitioner, legal heir of the deceased assessee, challenged assessment orders issued in the name of the deceased under Section 74, relating to mismatches in input tax credit and late filing of annual returns.

Key Facts
The assessee died on 01.05.2020. Despite this, GST proceedings—including pre-show cause notices (DRC-01A), show cause notices (DRC-01), and assessment orders—were issued in the deceased’s name for the assessment years 2017-18 and 2019-20. The petitioner argued that the assessment orders were invalid as they were passed after the limitation period under Section 73, and that the show cause notices failed to invoke the necessary ingredients under Section 74.

Court’s Reasoning
The Court noted that the death of the assessee had not been intimated to the Department, which led to the continuation of proceedings in the deceased’s name. The Court held that it was incumbent upon the legal representatives to inform the Department of the death. The Court further clarified, relying on its earlier batch order, that the threshold for invoking the extended limitation under Section 74 is lower under the GST regime compared to previous indirect tax laws.

The Court also observed that even if Section 74 proceedings were not maintainable, proceedings under Section 73 could still be sustained due to extensions granted by notifications under Section 168A and the Supreme Court’s orders extending limitation periods during the Covid-19 pandemic.

Importantly, the Court emphasized Section 93 of the GST Act, which makes legal heirs liable for the tax, interest, or penalty due from a deceased person, whether the business is continued or discontinued, to the extent of the estate’s capacity.

Decision and Directions
Given that the assessment orders were ex parte and passed without the petitioner’s reply, the Court set aside the impugned orders and remitted the cases to the assessing authority for fresh consideration. This was made subject to the petitioner depositing 10% of the disputed tax within thirty days and filing a reply to the show cause notices, treating the previous assessment orders as addenda.

The Court directed that, upon compliance, the assessing authority should pass a fresh order on merits within three months, and the attachment of the petitioner’s bank account would stand vacated. If the petitioner failed to comply, the Department was permitted to proceed with recovery as if the writ petitions had been dismissed.

Conclusion
The Madras High Court’s order clarifies the liability of legal heirs for GST dues of a deceased assessee and underscores the procedural obligations of both taxpayers and the Department in such cases. The judgment also reiterates the applicability of extended limitation periods and the necessity for due process before finalizing tax demands.