The Delhi High Court has held that a show cause notice issued to a legal representative more than three years after the alleged wrongdoer’s death is not invalid. 

The Bench of Justice Anil Kshetarpal and Justice Vimal Kumar Yadav while interpreting Section 93 of the Central Goods and Services Tax Act, 2017, said the provision permits tax, interest or penalty to be determined after death even when adjudication proceedings had not begun during the person’s lifetime.

The Court rejected a challenge to the constitutional validity of Section 93(1)(b), but left open the widow’s objections to the penalty order and directed the GST authorities to account for ₹15.40 lakh retained during the investigation.

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The case arose from a Directorate General of GST Intelligence investigation into the alleged fraudulent availment and passing on of input tax credit and claims for IGST refunds using invoices without a corresponding supply of goods. The investigation attributed a role to Ankit Dabas in matters concerning three entities: P.C. International, Satguru Corporation and B.K. Enterprises.

Dabas died on May 6, 2021. The Department was informed of his death in October that year. On July 31, 2024, it issued a show cause notice to several persons, including his widow, proposing penalties in respect of his alleged acts. The notice invoked Section 93 to proceed against her as his legal representative.

An order dated February 1, 2025 subsequently imposed a penalty of ₹1.50 lakh on her in one operative clause. The very next clause stated that no penalty was being imposed on her. The clauses also contained inconsistent language about the proposed appropriation of ₹15.40 lakh found during a July 2020 search of Dabas’s residence.

The widow challenged the notice and the order. She argued that Section 93 permits the Department to finish proceedings begun during a person’s lifetime, but does not allow fresh penalty proceedings to be initiated after death.

The High Court rejected that reading of the provision. Section 93 expressly covers tax, interest or penalty that “is determined after his death”, the Bench noted. It contains no requirement that a show cause notice must have been issued while the person was alive.

The Court distinguished an investigation from adjudication. Although the investigation had begun and Dabas’s statement had been recorded during his lifetime, those facts were not the source of the Department’s power to determine liability after death. That power came from Section 93 itself.

The Bench also drew a distinction between proving the deceased person’s alleged contravention and enforcing any resulting monetary liability through a legal representative. Section 93 does not make the representative personally guilty of the deceased person’s alleged acts, nor does it independently create a penalty against the representative.

The scope of payment depends on the circumstances set out in Section 93. Where the deceased person’s business has been discontinued, Section 93(1)(b) limits payment to the deceased’s estate and only to the extent that the estate can meet the charge. Whether those conditions were established in the widow’s case remains open for examination in appeal.

The Court added that the passage of three years between Dabas’s death and the notice does not, by itself, create a bar under Section 93. Its ruling does not exempt the Department from any applicable limitation requirements.

The widow also argued that pursuing a penalty after death was arbitrary because a legal representative may be unable to answer allegations about conduct known personally to the deceased.

The Court acknowledged that the loss of the person with first-hand knowledge could seriously affect the available defence and the weight fairly given to evidence. It held, however, that this difficulty did not make Section 93(1)(b) unconstitutional.

The legal representative must receive the material relied upon, have an effective opportunity to contest the alleged contravention, the statutory basis and the proposed amount, and retain the right to appeal an adverse decision. An inability to give a personal account of the deceased’s affairs cannot be treated as an admission, the Bench said.

On that basis, the Court rejected the challenge that Section 93(1)(b) was discriminatory or manifestly arbitrary.

Penalty dispute left for appeal

The High Court did not decide whether Dabas had committed the alleged contravention, whether the notice was properly served on the widow, or whether the conditions for recovery from his estate had been met.

It also declined to resolve the contradictory operative clauses of the February 2025 order. One clause imposed a ₹1.50 lakh penalty on widow, while the next said that no penalty was being imposed. The Bench said these issues should be examined by the statutory appellate authority.

The widow was given four weeks from the September 25 judgment to file an appeal under Section 107 of the CGST Act. If filed within that period, the appeal must be heard on its merits and must not be rejected as time-barred.

The Court separately addressed the ₹15.40 lakh found during the search of Dabas’s residence. The Department described the money as having been voluntarily submitted pending investigation and placed in a fixed deposit. The widow disputed the legality of its taking and continued retention.

The Bench held that a deposit pending investigation did not establish a right to retain the money indefinitely. It directed the authorities to provide the widow, within three weeks of the judgment, a complete account of the sum, including the fixed deposit details, interest earned and any withdrawal, transfer, appropriation or release.

For any amount the Department claims it can retain, it must identify the precise legal provision and order relied upon, the liability involved, its calculation and the basis for enforcing it against Dabas’s estate. A general reference to the penalty order will not suffice.

After the widow has an opportunity to respond and be heard, the competent authority must issue a reasoned decision on her claim for return of the money. Any amount for which no continuing lawful basis for retention is established must be released with the interest actually earned on it.

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