No Notice, No Recovery: GSTAT Quashes GST Order Against Legal Heir of Deceased Taxpayer, Upholds ITC Relief Under Section 16(5)

Background and Facts

The taxpayer, a proprietor registered under GST, filed his GSTR-3B return for March 2018 belatedly — on 16-6-2019, against a due date of 23-4-2019. On this ground, the Department issued an assessment notice in Form ASMT-10 dated 5-3-2020, proposing to disallow Input Tax Credit (ITC) of Rs1,72,430/- under Section 16(4) of the CGST/KGST Act, along with interest of Rs2,18,198/-.

The taxpayer could not respond to this notice on account of the COVID-19 pandemic and the resulting lockdown. The matter progressed to a pre-show-cause intimation in Form DRC-01A dated 13-11-2020, which again went unanswered, this time because of the taxpayer's continued illness. A formal show cause notice in Form DRC-01 followed on 15-7-2021, with a revised and enlarged demand — tax of Rs1,72,430/-, interest of Rs1,00,340/-, penalty of Rs20,000/-, and additional interest of Rs1,87,350/- for delayed filing of GSTR-3B returns for the period November 2017 to March 2018.

This notice too was decided ex-parte, culminating in an Order-in-Original dated 15-2-2022. The taxpayer's first appeal against this order was rejected by the Appellate Authority vide order dated 8-12-2022.

The taxpayer passed away on 5-9-2024, a fact evidenced by a death certificate registered with the Thrikkovilvattom Grama Panchayat, Kerala. His GST registration had, in the meantime, been cancelled suo motu with effect from 6-6-2023, and no returns were filed by him after that date. The present second appeal before the GSTAT was filed on 26-3-2026 by the taxpayer's son, acting as legal heir.

The Two Questions Before the Tribunal

The Tribunal framed the dispute around two distinct issues:

1. Whether the Department had followed the procedure mandated under Section 93(1)(b) of the CGST/KGST Act before seeking to fasten liability on the legal heir of a deceased proprietor whose business stood discontinued; and

2. Whether, on merits, the deceased taxpayer was entitled to the ITC in question in light of Section 16(5), inserted with retrospective effect from 1-7-2017.

Issue One: The Requirement of Notice to the Legal Representative Under Section 93

Section 93(1) of the CGST/KGST Act deals specifically with liability to pay tax, interest, or penalty where the person liable has died. It draws a distinction between two situations:

• Section 93(1)(a): where the business is continued after death by the legal representative or any other person, that person becomes liable for the tax, interest, or penalty due from the deceased; and

• Section 93(1)(b): where the business is discontinued, whether before or after death, the legal representative is liable to pay the dues only out of the estate of the deceased, and only to the extent the estate is capable of meeting the liability.

On the facts, the taxpayer's GST registration had been cancelled with effect from 6-6-2023, well before his death, and no further returns were filed thereafter. The Tribunal accordingly held that the business stood discontinued, bringing the matter squarely within Section 93(1)(b).

The critical finding, however, was procedural rather than substantive. The Tribunal noted that at no stage did the Department make any effort to ascertain whether an estate existed in the hands of the legal heir, nor was any notice issued to the legal heir invoking Section 93 for recovery of the dues. In the Tribunal's view, this omission was fatal. Liability under Section 93(1)(b) is not automatic upon death — it requires the Department to identify the legal representative, examine the estate available in his hands, and issue notice before proceeding further. Absent this exercise, there is simply no valid proceeding on record against the legal heir, and the demand cannot be sustained against him.

The Tribunal supported this conclusion by reference to a consistent and recent line of High Court authority, including decisions of the Andhra Pradesh, Rajasthan, Orissa, Karnataka, Madras, Jharkhand, and Allahabad High Courts (spanning late 2025 and 2026). Across these decisions, a common thread emerges: assessment or recovery proceedings conducted in the name of, or without notice to, the legal representative of a deceased taxable person are held to be non est — that is, proceedings that never validly came into existence in the eyes of law. Participation by an advocate on behalf of the legal heir, or the mere availability of appellate remedies, does not cure this defect, because the requirement of notice to the correct person goes to the root of jurisdiction. These courts have uniformly left the Department at liberty to initiate fresh proceedings against the legal representative, in accordance with law and within the limits of the inherited estate.

Applying this reasoning, the GSTAT held that in the complete absence of any process undertaken under Section 93 — even more than two years after the taxpayer's death — the impugned appellate order could not be sustained and the entire proceeding was liable to be set aside on this ground alone.

Practical implication: Where a taxpayer dies during the pendency of assessment, appeal, or recovery proceedings, practitioners representing the legal heir should not confine themselves to arguing the merits of the tax demand. A threshold objection under Section 93 — namely, whether the Department has actually identified the legal representative, inquired into the estate, and issued notice before proceeding — can by itself be dispositive of the entire matter, regardless of how the underlying tax dispute might otherwise be decided.

Issue Two: Retrospective ITC Relief Under Section 16(5)

The Tribunal also examined the matter on merits, given that the Department's representative did not oppose reconsideration of the ITC denial in light of the amended law.

Section 16(5) was inserted into the CGST Act by Section 118 of the Finance (No. 2) Act, 2024, with effect retrospectively from 1-7-2017. It provides that, notwithstanding the time limits in Section 16(4), a registered person is entitled to avail ITC in respect of invoices or debit notes pertaining to Financial Years 2017-18, 2018-19, 2019-20, and 2020-21, provided the relevant return under Section 39 was filed on or before 30-11-2021.

The Department's representative placed reliance on Circular No. 237/31/2024-GST dated 15-10-2024, which directs adjudicating and appellate authorities — including those dealing with matters already pending in appeal — to take into account the retrospective insertion of Section 16(5) while passing orders. The Department did not dispute that the ITC component of the demand fell to be re-examined in light of this provision, though it sought verification of the underlying facts (the date of filing, the return period, and correlation of the ITC claimed with the amount disallowed) through the Jurisdictional Proper Officer, consistent with the mechanism contemplated under the circular and Notification No. 22/2024-Central Tax.

The Department also drew a distinction that the Tribunal accepted as correct: Section 16(5) provides relief only against disallowance of ITC under Section 16(4) on account of belated filing of returns. It does not extend to, or dilute, the separate and independent interest liability of ₹1,87,350/- levied under Section 50(1) for delay in discharging admitted cash tax liability for November 2017, December 2017, January 2018, and March 2018. That liability arises from a different cause of action altogether and survives irrespective of the outcome under Section 16(5).

On the facts, the taxpayer's returns for the relevant period had been filed on 31-7-2018 (for July 2017 to February 2018) and 16-6-2019 (for March 2018) — both dates falling comfortably within the 30-11-2021 cut-off prescribed under Section 16(5). The Tribunal accordingly held that the ITC of ₹1,72,430/- was validly available to the taxpayer, and that the denial of this credit under the impugned order could not survive the retrospective amendment.

GST Case Law Santhome Latex Enterprises Versusn The Commissioner of CGST Thiruvananthapuram

Citation-2026 TAXONATION 2171 (GSTAT THIRUVANANTHAPURAM)

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