Chotu Devi vs. Union Of INDIA

Held

The Court held that while Section 93(1)(b) of the CGST Act allows for the recovery of tax liability from the legal representative out of the deceased's estate when a business is discontinued due to the assessee's death, this provision is subject to the procedural safeguards outlined in Section 75 of the CGST Act. Specifically, Section 75(4) mandates an opportunity of hearing when an adverse decision is contemplated, and Section 75(6) requires the proper officer to set out the relevant facts and the basis of their decision in the order. The Court found that the conceded fact was that the petitioner, as the legal heir, was not issued any independent notice prior to the passing of the assessment orders, and the orders themselves appeared to fall foul of Section 75(6). Therefore, the assessment proceedings were vitiated due to the non-compliance with the statutory provisions of Section 75(4) and 75(6) of the CGST Act. The Court quashed the impugned orders and granted liberty to the respondents to issue a fresh notice to the petitioner and proceed in accordance with law after affording an opportunity of hearing.

Facts

The petitioner, Chotu Devi, is the wife and legal heir of late Shri Hansa Ram Choudhary, proprietor of M/s Shri Satguru Marbles Industry. Shri Hansa Ram Choudhary passed away on December 30, 2025. The petitioner is challenging orders dated December 31, 2025 (under Section 74 of the CGST/RGST Act) and March 26, 2026 (Order-in-Original under the CGST Act). These orders raised demands for tax, interest, and penalties against the deceased proprietor. The petitioner contends that she, as the legal heir, was not issued any notice, impleaded in the proceedings, or afforded an opportunity of hearing before these orders were passed, rendering them void.

Key Issues

1. Whether the impugned orders passed against the deceased proprietor of a sole proprietorship concern, without impleading or hearing his legal heir, are void ab initio and non est, in light of Section 75(4) and 75(6) of the CGST Act? Petitioner's arguments: The petitioner argues that a sole proprietorship concern has no separate legal existence from its proprietor. Upon the proprietor's death, the concern ceases to exist, making any orders passed against it void. The impugned orders are further vitiated by the failure to issue notice and provide a hearing to the legal heir, violating mandatory provisions of Section 75(4) and 75(6) of the CGST Act, leading to a one-sided application of mind. Revenue's arguments: The revenue contends that under Section 93 of the CGST Act, tax liability is recoverable from legal representatives even after the death of the assessee.