Proceedings Against Deceased Proprietor 'Void Ab Initio': CESTAT Quashes Service Tax Demand [Read Order]
The CESTAT held that the proceedings before the Adjudicating Authority had abated on the date of the proprietor's death, rendering the subsequent order-in-original 'non-est' (non-existent).
Proceedings - Deceased Proprietor - Void Ab Initio - CESTAT - Service Tax Demand - taxscan
Proceedings - Deceased Proprietor - Void Ab Initio - CESTAT - Service Tax Demand - taxscan
The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed an appeal, holding that tax assessment proceedings abate upon the death of a sole proprietor, and any order passed thereafter is 'void ab initio'.
CESTAT Has No Jurisdiction to Hear Appeals Involving Goods Imported as Baggage as Explicitly Barred by S. 129A(1) of Customs Act [Read Order]
Manish Mehta, the legal heir of Late Smt. Pushpa Mehta, filed the appeal against an order that had dismissed his challenge to a service tax demand. The demand originated from a Show Cause Notice dated 17.10.2018 issued to M/s. Mehta & Company, a proprietorship engaged in the job work manufacturing of water meters, which claimed an exemption under Notification No.25/2012-ST.
Catalyst Decoder: Turning Questions into Clarity! Click here
The core issue arose because the sole proprietor, Smt. Pushpa Mehta, passed away on 08.12.2018 while the adjudication proceedings were pending. Despite being informed of her death, the Adjudicating Authority proceeded to pass an Order-in-Original on 30.07.2019 confirming the demand against the deceased. The appeal filed by the legal heir was subsequently rejected by the Commissioner (Appeals) on the grounds of non-maintainability and failure to make the mandatory pre-deposit.
Counsel for the appellant argued that the order-in-original was void as it was passed against a dead person, relying on the Supreme Court's decision in Shabina Abraham and Ors. Vs. CCE & Customs. He contended that in the absence of a specific machinery provision in the Finance Act, 1994, read with the Central Excise Act, 1944, there is no provision to continue assessment or recovery against a deceased assessee. The Department's representative supported the lower orders, which had rejected the appeal on procedural grounds.
Catalyst Decoder: Turning Questions into Clarity! Click here
The bench, comprising Ms. Binu Tamta (Judicial Member) and Ms. Hemambika R.Priya (Technical Member), agreed with the appellant. The Tribunal followed the principle laid down in Shabina Abraham, which held that an 'assessee' is the person liable to pay duty, and in the absence of a specific legal mechanism, proceedings cannot be continued against the legal heirs of a deceased sole proprietor.
The Tribunal noted that this principle had been subsequently upheld by the Madras High Court and in previous CESTAT decisions. The CESTAT held that the proceedings before the Adjudicating Authority had abated on the date of the proprietor's death, rendering the subsequent order-in-original 'non-est' (non-existent).
The impugned order of the Commissioner (Appeals) was also set aside as being contrary to established law. The service tax demand was quashed, and the appeal was allowed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
