'Agent’ u/s 65(7) Not Equivalent to ‘Legal Heir' Status: Orissa HC Rules Service Tax against Dead Person Not Tenable in Eye of Law [Read Order]

In a recent ruling, the Orissa High Court held that a service tax demand issued against a deceased person is not valid in law, and that the term “agent” under Section 65(7) of the Finance Act, 1994 cannot be treated as equal in status to a “legal heir.”

Smt. Kanakalata Senapati, widow of late Atal Bihari Senapati, filed a writ petition challenging the order passed by the tax authorities in 2024 demanding service tax, interest, and penalty for the years 2015-16 and 2016-17. The order was issued in the name of her husband, who had died in 2021. She argued that the authorities were informed of his death with proof, yet they continued proceedings and even issued recovery notices in 2025 demanding nearly Rs. 36 lakh.

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The petitioner’s counsel argued that the room rent charged by the lodge run by her late husband was below the taxable limit, and that income tax returns filed earlier did not automatically create liability under service tax law. It was further argued that once the taxpayer had died, the proceedings could not continue against him, and that heirs could not be treated as “agents” under Section 65(7).

The department’s counsel argued that since the show cause notice was issued while the husband was alive, the proceedings had to continue, and that the petitioner should have filed an appeal before the Appellate Authority instead of approaching the High Court.

The Division Bench comprising Chief Justice Harish Tandon and Justice Murahari SriRaman observed that tax statutes must be applied strictly as written, and courts cannot add provisions that the legislature has not enacted. The court pointed out that unlike the Income Tax Act, which contains provisions making heirs liable, the Finance Act, 1994 has no such clause.

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The court referred to the Supreme Court’s decision in Shabina Abraham v. Collector of Central Excise (2015), which explained that proceedings cannot continue against a dead person unless the law expressly allows it.

The court held that the order passed against the deceased was invalid and unsustainable in law. The recovery notices issued in 2025 were also quashed. The writ petition was allowed in favour of the petitioner.

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