Liability in Other Special Cases and Recovery Priorities (CA Final Indirect Tax)

Understand Liability in Other Special Cases and Recovery Priorities

Key rules to remember

Death, business continued (Section 93(1)(a))

Legal representative or other person continuing the business = liable for the tax, interest and penalty due from the deceased

Section 93(1)(a) makes the continuing person liable for the dues of the deceased.

Death, business discontinued

Liability of legal representative = lower of (dues) and (value of estate available to meet the charge)

Discontinuance may happen before or after death. Dues determined after death are also covered.

HUF or AOP partition or disruption (Section 93)

Each member or partner immediately before partition = jointly and severally liable for dues up to the date of partition or disruption

The department may recover the whole from any one member. Dues determined after the partition are covered.

Court of Wards and court-appointed managers (Section 92)

Court of Wards, Administrator-General, Official Trustee, receiver or manager = liable in the same manner and extent as the taxable person

Applies where the estate or business is under their management. This is Section 92, not Section 93. Section 91 deals with guardians, trustees and agents of incapacitated persons.

First charge on property (Section 82)

Tax, interest and penalty payable to Government = first charge on the property of the person liable

Section 82 is expressly subject to the Insolvency and Bankruptcy Code, 2016. It overrides other laws that say otherwise.

How to solve Liability in Other Special Cases and Recovery Priorities questions

1. 1Identify the person originally liable: proprietor, HUF, AOP, ward or an estate under management.
2. 2Identify the event: death, partition or disruption, or court management.
3. 3Match the event to the rule: death goes to the legal representative (Section 93), partition goes to members jointly and severally (Section 93), court management goes to the manager (Section 92).
4. 4For death, check whether the business was continued or discontinued. This decides whether liability is full or limited to the estate.
5. 5Check the period covered. For HUF or AOP it is dues up to the date of partition or disruption, whether determined before or after.
6. 6If the facts mention insolvency, note that both Section 82 and Section 93 are subject to the Insolvency and Bankruptcy Code, 2016, so the insolvency provisions must be considered.
7. 7If the question asks about ranking against other creditors, add that the dues are the first charge on property under Section 82.
8. 8Write the conclusion with the amount each person must pay or the cap on it.

Quickest way: Event, person, limit

Common mistakes in Liability in Other Special Cases and Recovery Priorities

• Saying the legal representative is always liable for the full dues after death.

  Students remember the liability but forget the discontinuance limit.

  Fix: Ask whether the business was continued. If discontinued, liability is only out of the estate to the extent it can meet the dues.

• Limiting a HUF member's liability to his own share.

  Students assume liability follows shares in the partition.

  Fix: The liability is joint and several. The department can recover all dues from any one member. Shares matter only between the members themselves.

• Excluding dues determined after the death or partition.

  Students think the demand must exist before the event.

  Fix: The law covers dues whether determined before or after the death, partition or disruption, as long as they relate to the period up to that event.

• Attributing the first charge on property to Section 93.

  The topic title groups priority with special liability, so the two provisions blur.

  Fix: Section 93 decides who pays on death or partition. The first charge on property is Section 82. Cite each for its own purpose.

• Citing Section 93 or Section 91 for the Court of Wards, Administrator-General, Official Trustee, receiver or manager.

  Students lump all special-liability provisions under one section.

  Fix: Cite Section 92 for court-managed estates. Section 91 deals with guardians, trustees and agents of incapacitated persons. Section 93 covers only death and partition or disruption of a HUF or AOP.

• Assuming Section 82 is the only section subject to the Insolvency and Bankruptcy Code, 2016.

  Students remember the saving words in the first-charge section and assume the liability sections have no such saving.

  Fix: Both Section 82 and Section 93 are expressly subject to the Code. If a case involves insolvency, consider the Code's provisions along with either section.

Worked examples