Sagi Arun Kumar vs. The Deputy Commissioner And 2 Others

Facts

The petitioner, Sagi Arun Kumar, is the son of the deceased service provider, M/s. S.L. Manohar Rao. The Deputy Commissioner of Central Tax issued an Order-in-Original (No.35/2021-22-Adjn-ST dated 28.02.2022) demanding Service Tax of Rs. 3,10,592/-, penalty of Rs. 3,10,592/-, interest, and late fees from the petitioner. This demand was based on a show cause notice dated 24.11.2020. The petitioner contends that the Order-in-Original was passed against a dead person, M/s. S.L. Manohar Rao, who expired after the show cause notice was issued but before the order was passed. The petitioner also argues that the demand is barred by limitation. The tax periods in dispute are 2014-15 for Service Tax and from the second half of 2015-16 to June 2017 for late fees.

Held

The Court held that there cannot be a levy of tax on a dead person without the statute providing for a machinery provision in this regard. The Court noted that the Finance Act, 1994, did not provide for any machinery provision to levy tax on a service provider who had expired. Relying on the Supreme Court's decision in Shabina Abraham (supra), the Court found no other option but to set aside the impugned Order-in-Original dated 28.02.2022 passed by respondent No. 1. The Court allowed the Writ Petition. The issue of limitation was implicitly addressed as the primary ground for setting aside the order was the levy on a dead person, rendering the demand unsustainable regardless of limitation.

Key Issues

1. Whether the demand for Service Tax, penalty, interest, and late fees against a deceased person, M/s. S.L. Manohar Rao, is legally sustainable under Section 73(2) and Section 78 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017, and Section 77 and Section 70 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017, when the service provider died before the Order-in-Original was passed? 2. Whether the Order-in-Original is ex-facie barred by limitation for the tax period 2014-15, and even by the extended period of limitation by the date of the show cause notice? Petitioner's Arguments: The petitioner argued that an Order-in-Original cannot be passed against a dead person or their legal heirs, citing the Supreme Court decision in Shabina Abraham vs. Collector of Central Excise and Customs. The petitioner also contended that the demand was barred by limitation. Revenue's Arguments: The learned counsel for respondents No. 1 and 2 acknowledged that the service provider had expired before the Order-in-Original was passed but submitted that this information was not furnished to the Department.