The Karnataka High Court has held that GST recovery cannot be enforced against an entity distinct from the proprietary concern of a deceased taxpayer and directed the department to examine liability of legal heirs under Section 93 of the CGST/KGST Acts.

The bench of Justice B. M. Shyam Prasad has quashed GST recovery notices issued in Form GST DRC-13 against a private limited company for dues arising from a separate proprietary concern, holding that the company was a distinct legal entity and could not be proceeded against for the tax liabilities of the deceased proprietor.

The proceedings arose from GST demands relating to the tax period April 2021 to March 2022 against company, a proprietary concern constituted by late Rudraswamy B. K., who died on May 25, 2023.

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The first petitioner before the High Court was the company, while the other two petitioners were the deceased proprietor’s son and wife. The company challenged recovery notices issued in Form GST DRC-13, while the deceased proprietor’s family members challenged the underlying adjudication orders and corresponding GST DRC-07 summaries.

The record showed that two adjudication orders had been passed on December 22, 2025 under Section 73 of the CGST/KGST Acts, both concerning the 2021-22 tax period. Corresponding summaries were issued in Form GST DRC-07, followed by DRC-13 recovery notices.

The recovery notices were directed towards the bank account of BKR Services Private Limited.

The petitioners argued that the GST authorities could not attach or recover amounts from the private limited company’s bank account because the company was an entity entirely distinct from the proprietary concern of the deceased.

The petitioners contended that the company could not be saddled with the liabilities of the proprietary concern and that the company had no connection with the estate of the deceased proprietor.

The argument was essentially based on the distinction between a private limited company as a separate legal entity and a proprietary concern belonging to an individual. According to the petitioners, recovery proceedings for GST dues, interest or penalty of the deceased taxable person could not simply be shifted to an unrelated company.

The Karnataka High Court accepted this contention.

The Court specifically recorded that it was undisputed that BKR Services Private Limited was different and distinct from the proprietary concern constituted by the deceased Rudraswamy B. K.

On that basis, the Court concluded that the DRC-13 recovery notices could not have been issued against the private limited company.

The Court therefore intervened and quashed the recovery notices issued in Form GST DRC-13.

This finding is significant because the recovery mechanism under GST cannot be used to proceed against an entity merely because of an alleged connection with the person against whom the original tax liability arose. The liability must be legally traceable to the person or property against which recovery is sought.

The second aspect of the case concerned the position of the deceased proprietor’s family members.

The petitioners informed the Court that Rudraswamy B. K. had died on May 25, 2023 and that his family members had reported his death to the authorities through a letter dated June 28, 2023.

After receiving show cause notices, the family members had disputed that they could automatically be treated as legal heirs for purposes of the GST proceedings. They also pointed out their individual circumstances and submitted that several legal questions concerning continuation of the proceedings required examination.

The Court found that the adjudication orders did not adequately consider whether the proceedings could be sustained under Section 93(1)(a) or Section 93(1)(b) of the CGST/KGST Acts.

This omission, according to the Court, constituted a failure to consider material circumstances and provided sufficient ground for judicial interference.

Rather than conclusively determining the liability of the family members itself, the High Court restored the matter to the adjudicating authority.

The Court permitted the second and third petitioners to submit detailed replies to the respective show cause notices. It directed that all their legal and factual grounds would remain open for consideration by the competent authority.

The Court also noted another contention raised by the petitioners: that two separate show cause notices had been issued for the same tax period, April 2021 to March 2022, although they concerned different issues.

Rather than deciding that issue at the writ stage, the High Court left it open for consideration after the petitioners were given an opportunity to submit detailed responses.

The High Court ultimately allowed the writ petition on multiple grounds.

First, the DRC-13 recovery notices dated July 4, 2026 addressed to the bank concerned were quashed.

Second, the adjudication orders and their corresponding summaries in Forms GST DRC-07 were also quashed, with liberty to the deceased proprietor’s family members to respond to the underlying show cause notices.

The Court expressly kept all grounds available to the petitioners open for consideration on the basis of their fresh responses.

The High Court directed the second and third petitioners to file their responses before the concerned officer along with a certified copy of the High Court’s order. The deadline fixed by the Court was August 14, 2026.

Thus, the Court did not hold that the underlying GST dues were permanently extinguished. Instead, it set aside the orders because of the legal and procedural deficiencies identified in the adjudication and permitted the proceedings to be reconsidered after the affected parties receive an opportunity to respond.

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