Section 93 CGST Act Permits Initiation of Tax Proceedings After Death | When Conditions Satisfied : Delhi HC

The Delhi High Court clarified the scope of Section 93 of the Central Goods and Services Tax Act, 2017, holding that the provision permits initiation of tax, interest, or penalty proceedings after the death of a person liable under the Act, provided the conditions prescribed therein are satisfied. The Court rejected the contention that such proceedings can only be commenced if they had already started during the deceased's lifetime, emphasizing that Section 93 expressly contemplates determination of liability after death. Furthermore, the constitutional challenge to Section 93(1)(b) on grounds of arbitrariness and violation of Article 14 was dismissed, as the provision's limitation of liability to the estate's capacity provides a rational basis.

Background & Facts

The Dispute

The proceedings arose from an investigation by the Directorate General of GST Intelligence (DGGI) concerning alleged fraudulent availment and passing on of Input Tax Credit and refund of Integrated Goods and Services Tax on the strength of invoices without corresponding supply of goods. The investigation focused on late Sh. Ankit Dabas and his association with three entities: M/s P.C. International, M/s Satguru Corporation, and M/s B.K. Enterprises.

Key Facts

• On 23.07.2020, DGGI searched the residential premises of late Sh. Ankit Dabas at Dwarka, New Delhi, and found cash amounting to ₹15,40,000.
• The Show Cause Notice (SCN) records that this amount was voluntarily submitted by Sh. Ankit Dabas with the Department till completion of the investigation as security against any tax liability.
• The amount was thereafter kept in a fixed deposit with the State Bank of India, R.K. Puram Branch, New Delhi.
• Sh. Ankit Dabas died on 06.05.2021.
• During the investigation, the Department was informed of his death through a letter dated 05.10.2021 from his cousin, Sh. Sachin Dabas, along with a copy of the death certificate.
• The communication requested that any inquiry relating to late Sh. Ankit Dabas be forwarded to the Petitioner (Jaiwanti Dabas, his wife) at her address in Sector-106, Gurugram, Haryana.
• On 31.07.2024, the SCN was issued to several noticees, including the Petitioner, proposing separate penalties under Section 122(3)(a) of the CGST Act and invoking Section 93 against her as the legal representative of her late husband.
• The SCN proposed appropriation of ₹15,40,000 towards the proposed liability.
• The Impugned Order (Order-in-Original) was dated 01.02.2025 and imposed a penalty of ₹1,50,000 upon the Petitioner under clause AD, while clause AE stated that no penalty was being imposed and ordered that the ₹15,40,000 should not be appropriated against the alleged liability.
• The Petitioner did not participate in the adjudication proceedings, asserting non-receipt of the Notice.
• The present Writ Petition (W.P.(C) 7254/2025) was filed on 23.05.2025, challenging the SCN and the Impugned Order.

Procedural History

• 06.05.2021: Date of death of Sh. Ankit Dabas.
• 05.10.2021: Date of letter from Sh. Sachin Dabas informing the Department of the death.
• 23.07.2020: Date of search at Dwarka premises and seizure of ₹15,40,000 cash.
• 31.07.2024: Date of issuance of Show Cause Notice to the Petitioner.
• 01.02.2025: Date of the Impugned Order (Order-in-Original).
• 23.05.2025: Date of filing of the present Writ Petition.

Relief Sought

The Petitioner sought:

• Quashing of the Show Cause Notice dated 31.07.2024 and the Impugned Order dated 01.02.2025.
• Release of ₹15,40,000 retained by the Department.
• A declaration that Section 93(1)(b) of the CGST Act is unconstitutional.

The Legal Issue

The central question was whether Section 93(1) of the Central Goods and Services Tax Act, 2017 permits the initiation of tax, interest, or penalty proceedings after the death of a person liable under the Act, or whether such proceedings can only be commenced if they had already been initiated during the deceased's lifetime.

Arguments Presented

For the Petitioner

The Petitioner contended that the expression "is determined after his death" in Section 93(1) must be read as meaning "is determined after his death in proceedings already commenced during his lifetime". It was argued that fresh proceedings proposing a penalty for the alleged acts of late Sh. Ankit Dabas could not have been initiated against the Petitioner more than three years after his death. Reliance was placed on the principle that liability for aiding or abetting under Section 122(3)(a) is founded upon the personal conduct of the alleged wrongdoer, and a legal representative cannot meaningfully answer allegations concerning matters within the personal knowledge of a deceased person. The Petitioner further relied upon Section 126(3) and contended that Section 93(1)(b), insofar as it permits determination of a penalty after death, is arbitrary and violative of Article 14 of the Constitution. The Petitioner additionally disputed service of the Notice and the continued retention of ₹15,40,000 by the Department.

For the Respondent

The Respondents submitted that Section 93 expressly contemplates determination of tax, interest, or penalty after death and contains no requirement that adjudicatory proceedings must have commenced during the lifetime of the deceased. It was emphasised that the investigation had commenced during the lifetime of late Sh. Ankit Dabas and his statement had also been recorded. The Respondents further contended that the penalty under Section 122 of the CGST Act is a civil liability, and therefore principles governing abatement of criminal proceedings are inapplicable. They disputed the plea of non-service and maintained that the SCN was served through the modes contemplated by Section 169 of the Act. An objection was raised to the entertainment of the present Writ Petition in view of the statutory remedy of Appeal under Section 107, noting that the ordinary period of three months for filing such Appeal had already expired.

The Court's Analysis

The Court commenced by distinguishing between questions of law (maintainability of the Writ Petition) and individual adjudication (merits of the Impugned Order), relying on Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority to hold that a pure question of law may be examined notwithstanding the availability of an alternative statutory remedy under Section 107. The Court then turned to the construction of Section 93(1).

The Court observed three significant features of the provision: (i) it includes a penalty; (ii) it contemplates a liability which is determined after the death of the person concerned; and (iii) the nature and extent of representative liability depend upon whether clause (a) or clause (b) is attracted. Under clause (b), payment is confined to the estate of the deceased and only to the extent that the estate is capable of meeting the charge.

Rejecting the Petitioner's construction, the Court held that the words "is determined after his death" in Section 93(1) contain no qualification requiring proceedings to have been commenced during the lifetime. The provision's concluding words distinguish a liability determined before death but remaining unpaid from one determined thereafter, and they do not make a Notice during the deceased's lifetime a condition precedent to the latter determination. The opening words "where a person, liable to pay tax, interest or penalty under this Act, dies" cannot be confined to a liability already quantified before death, for the provision itself contemplates the tax, interest or penalty being determined thereafter.

The Court clarified that Section 93 must be kept distinct from Section 122(3)(a) of the Act. While Section 122(3)(a) applies to a person who aids or abets offences and provides for a penalty, Section 93 enables the liability arising from the deceased's conduct to be determined and enforced through the legal representative. The material collected during the lifetime of the deceased may form part of the evidentiary record, but investigation and adjudication are distinct stages; it is unnecessary to treat the investigation itself as commencement of penalty proceedings to sustain a post-death determination. The authority to make a determination after death must be found in the statute itself and, in the present case, follows from Section 93.

On the constitutional challenge, the Court held that Section 93(1)(b) preserves liabilities attributable to the deceased's lifetime conduct for lawful determination and satisfaction from his estate. Death creates the need for someone to represent that estate, and the resulting distinction bears a direct relation to the statutory purpose. Section 93 does not deem the representative to have committed the alleged wrong, and clause (b) confines payment to the estate's capacity to meet the charge. The underlying contravention and the conditions of representative liability must still be established by the Adjudicating Authority. The Court further noted that Section 126(3) requires an effective opportunity of hearing, and the representative must receive the relied-upon material and be permitted to contest the alleged contravention, the statutory basis, and the proposed amount. Inability to give a personal account of the deceased's affairs cannot be treated as an admission. The presumption of constitutionality and the latitude recognised for economic legislation in R.K. Garg v. Union of India do not exclude scrutiny under Article 14, but the statutory purpose, representative procedure, and limitation to estate assets provide a rational basis for the provision.

The Verdict

The Petitioner succeeded on the limited question of law regarding the scope of Section 93. The Court held that Section 93 does permit proceedings to be commenced after death, provided the conditions prescribed by the provision are satisfied. The challenge to the constitutional validity of Section 93(1)(b) was rejected. Consequently, the Writ Petition was disposed of with the following directions: the Petitioner is granted liberty to institute an Appeal under Section 107 of the CGST Act against the Impugned Order within a period of four weeks from today; if such Appeal is instituted within the aforesaid period, it shall be entertained and decided on merits and shall not be rejected on the ground of limitation. Independently, within three weeks from today, the Respondents shall furnish to the Petitioner a complete account of ₹15,40,000, including its present status, particulars of the fixed deposit, interest earned thereon, and details of any withdrawal, appropriation, transfer, or release, together with supporting records. For every amount claimed to be lawfully retained or appropriated, the Respondents shall identify the precise statutory provision and order relied upon, the liability sought to be secured or discharged, its computation, and the basis on which it is asserted to be enforceable against the estate of late Sh. Ankit Dabas.

What This Means For Similar Cases

Posthumous Tax Proceedings Require Strict Statutory Compliance

The judgment establishes that tax authorities may initiate proceedings under Section 93 CGST Act after a taxpayer's death, but only if they strictly comply with the procedural safeguards embedded in the provision. Practitioners must ensure that:

• The liability sought to be enforced arises from conduct attributable to the deceased under the substantive provisions of the CGST Act.
• The Adjudicating Authority establishes the alleged contravention and determines the penalty or tax due, irrespective of when the Notice is issued.
• Where Section 93(1)(b) is invoked (business discontinued), the department must prove that the amount sought is confined to the estate and does not exceed its capacity to meet the charge.
• The legal representative must be afforded an effective opportunity of hearing under Section 126(3), including access to all relied-upon material and the right to contest the contravention, statutory basis, and proposed amount.

Department Bears Burden to Justify Retention of Seized Assets

The Court's direction regarding the ₹15,40,000 seized from the deceased's premises creates a significant procedural obligation for tax authorities in posthumous cases. Key takeaways for litigants:

• The mere characterization of funds as "voluntarily submitted" or placement in a fixed deposit does not establish a lawful basis for indefinite retention.
• Upon challenge, the department must furnish a complete account of the seized amount, including:
  • Present status and particulars of the fixed deposit
  • Interest earned thereon
  • Details of any withdrawal, appropriation, transfer, or release
  • Supporting records for all transactions
• For each amount claimed to be lawfully retained, the department must identify:
  • The precise statutory provision and order relied upon
  • The specific liability sought to be secured or discharged
  • The computation of that liability
  • The basis for enforceability against the deceased's estate
• Failure to discharge this burden will result in release of the amount (with actual interest earned) to the legal representative, without prejudice to the rights of legal heirs or successors.

Constitutional Validity Hinges on Estate-Limited Liability

The judgment provides a clear framework for assessing challenges to posthumous liability provisions under Article 14. The Court's reasoning confirms that:

• A provision permitting determination of liability after death is not inherently arbitrary if it limits recovery to the estate's assets.
• The rational basis lies in the statutory purpose: ensuring satisfaction of liabilities arising from the deceased's conduct without imposing personal liability on representatives.
• Safeguards such as the opportunity of hearing (Section 126(3)) and the right to appeal prevent the provision from conferring unguided power.
• Challenges based on the representative's inability to give a personal account of the deceased's affairs are misplaced, as the statute does not treat such inability as an admission of liability.

This precedent will guide challenges to similar provisions in other tax statutes (e.g., Income Tax Act, Customs Act) where posthumous proceedings are contemplated, reinforcing that estate-limited liability with procedural protections withstands constitutional scrutiny.