GST Assessment Against Legal Heirs Quashed for Non-Compliance with Hearing Mandate — Rajasthan High Court

Overview of the Case

The Rajasthan High Court recently adjudicated a significant matter concerning the validity of GST assessment proceedings initiated against the legal heirs of a deceased sole proprietor. The case — Lrs of Krishan Lal Vs Union of India — raised critical questions about procedural compliance under the Central Goods and Services Tax Act when tax demands are raised posthumously against the estate of a deceased assessee, and whether legal representatives can be subjected to such demands without being afforded the statutory right of a personal hearing.

The Court's ruling reinforces the principle that substantive tax liability and procedural safeguards are inseparable components of any valid assessment order, particularly in cases involving deceased assessees and their legal representatives.

Background Facts

The Deceased Proprietor and His Business

Late Shri Krishan Lal was the sole proprietor of M/s Krishan Lal Khet Pal (GSTIN 08ABDPL1259L1ZH), a business registered under the Goods and Services Tax framework. He passed away on 25.05.2022, leaving behind legal representatives (hereinafter referred to as "the petitioners") who subsequently became embroiled in a tax dispute arising from business activities conducted during his lifetime.

Retrospective Cancellation of GST Registration

Following the death of the proprietor, the GST registration of the firm was cancelled retrospectively with effect from 30.09.2022, through an order dated 13.10.2022. The petitioners alleged that this cancellation was carried out without observing due process and, critically, without extending any opportunity of personal hearing to them. This set the tone for the procedural infirmities that would later permeate the entire assessment chain.

Issuance of Show Cause Notice

Subsequently, the Joint Commissioner, State Tax, Sri Ganganagar, issued a show cause notice dated 17.05.2024 in Form GST DRC-01 under Sections 50 and 73(1) of the CGST/RGST Act for Financial Year 2019–20. The notice directed the deceased — who had already passed away more than two years prior — to make payment within 30 days.

The petitioners raised specific objections against this notice, contending that:

  • The notice was not issued in the prescribed statutory format.
  • No opportunity of personal hearing was provided alongside the notice.
  • The notice was addressed to the deceased assessee rather than to his legal representatives.

The Impugned Assessment Order

Despite these deficiencies, a demand order dated 29.08.2024 was passed by the Assistant Commissioner, State Tax, Ward-1, Circle-A, Sri Ganganagar, raising a demand for unpaid tax pertaining to Financial Year 2019–20. The order was once again framed in the name of the deceased rather than the legal heirs, and was passed without compliance with Section 75(4) of the CGST Act, which categorically requires that a personal hearing be granted before any adverse decision is made.

The foundation of the State's claim against the petitioners rested on Section 93 of the CGST Act, which deals with special provisions regarding tax liability in certain circumstances, including death. The relevant extract of the provision, as reproduced in the Court's earlier decision, reads as follows: