Smt. Devan Anisha vs. Union Of INDIA

Facts

The petitioner, Smt. Devan Anisha, is the legal heir of the deceased Mahendran Rupesh Naidu, proprietor of M/s Mahendran Rupesh Naidu. The deceased's firm was engaged in subcontracting services. A show cause notice was issued on 12.10.2018 for alleged non-payment of service tax amounting to Rs. 10,74,919/- on receipts of Rs. 86,96,757/- for the financial year 2013-14. The demand was confirmed by the Adjudicating Authority on 30.06.2020, with penalties and late fees. The petitioner's appeal was dismissed on 03.02.2023. The proprietor, Mahendran Rupesh Naidu, died on 03.05.2023. Subsequently, a garnishee notice was issued to the petitioner on 13.12.2024 for recovery of the dues.

Held

The Court held that the demand notice dated 13.12.2024 issued against the legal representatives of the deceased proprietor is illegal and unconstitutional. The Court relied on the Supreme Court's decision in Shabina Abraham (supra), which held that the Finance Act, 1994, and by extension, the Central Excise Act, lacks specific machinery provisions for initiating recovery proceedings against the legal heirs of a deceased person. The Court noted that Section 11 of the Central Excise Act, relied upon by the revenue, deals with modes of recovery and does not provide for assessment or recovery against the estate of a dead person or their legal heirs. Since the proprietorship firm ceased to exist with the death of its proprietor, and there are no statutory provisions to recover dues from legal heirs in such a scenario, the demand notice is unsustainable. Consequently, the petition was allowed, and the demand notice dated 13.12.2024 was quashed.

Key Issues

1. Whether a demand for service tax and penalties can be raised against the legal heirs of a deceased proprietor of a proprietorship firm, when no specific machinery provisions exist in the Finance Act, 1994 or CGST Act, 2017 for such recovery, and in light of the Supreme Court's decision in Shabina Abraham Vs. Collector of Central Excise and Customs. The petitioner argued that recovery proceedings cannot be initiated against the legal heirs of a deceased person for dues of a proprietorship firm, citing the Supreme Court's judgment in Shabina Abraham (supra), which held that the Finance Act, 1994 (and by implication, the CGST Act, 2017) lacks specific machinery provisions for proceeding against the legal heirs of a dead person for recovery of tax dues. The petitioner prayed for the quashing of the garnishee notice and for the revenue authorities to desist from recovering dues from the legal heirs. The respondents contended that the demand notice was issued prior to the death of Mahendran Rupesh Naidu, and the appellate order was passed prior to his death. Therefore, the Revenue has the right to recover the assessed amount from the legal representative of the assessee. They argued that the petition should be dismissed.