The Karnataka High Court has ruled that GST authorities cannot recover the tax dues of a proprietary concern from a separate private limited company merely because the two businesses may have a similar name or connection with the same family. The Court held that a company incorporated as a distinct legal entity cannot be proceeded against for GST liabilities belonging to a proprietary concern operated by a deceased proprietor.
The judgment was delivered by Justice B. M. Shyam Prasad in BKR Services Private Limited v. Santoshkumar Rudraswamy, Writ Petition No. 21878 of 2026 (T-RES).
Dispute Over GST Recovery From Company’s Bank Account
The proceedings arose following the death of Rudraswamy B K, proprietor of B. K. R. Swamy Security Agencies, on May 25, 2023. GST proceedings concerning the proprietary business subsequently resulted in recovery action.
BKR Services Private Limited, along with the deceased proprietor’s son and wife, approached the Karnataka High Court challenging various actions taken by the GST authorities.
The company specifically challenged recovery notices issued in Form GST DRC-13 to the State Bank of India. Through these notices, the bank was directed to recover the outstanding GST dues from the company’s bank account.
BKR Services Private Limited argued that it was an independent legal entity and had no liability for the GST dues of the deceased proprietor’s proprietary concern.
Company and Proprietary Concern Are Separate Legal Entities
The High Court accepted the fundamental distinction between the two entities.
The Court noted that it was undisputed that BKR Services Private Limited was separate and distinct from the proprietary concern operated by Rudraswamy B K. A proprietary concern does not possess a legal personality independent of its proprietor, whereas a private limited company has a separate legal identity from its shareholders, directors and other persons associated with it.
Consequently, the GST authorities could not treat the private limited company as liable for the tax arrears of the deceased proprietor’s business without establishing an independent legal basis for such recovery.
On this ground, the Karnataka High Court quashed the DRC-13 recovery notices dated July 4, 2026, insofar as they sought recovery of the proprietary concern’s GST dues from the company’s bank account.
The ruling reinforces the principle of separate legal identity in GST recovery proceedings and makes it clear that recovery action must be directed against the legally liable taxable person or persons.
High Court Examines Liability of Legal Representatives Under Section 93
The Court also considered the challenge raised by the deceased proprietor’s son and wife against adjudication orders passed under Section 73 of the CGST/KGST Acts for the financial year 2021-22.
The petitioners argued that the GST authorities had failed to properly consider Section 93, which deals with the liability of legal representatives when a taxable person dies.
Section 93 becomes particularly relevant where tax, interest or penalty proceedings relate to a taxable person who has died. Therefore, before fastening liability upon legal representatives, the statutory requirements governing such liability have to be appropriately considered.
The High Court found that the adjudication orders did not adequately examine whether the proceedings could be sustained under Section 93(1)(a) or Section 93(1)(b).
According to the Court, this failure to consider a material statutory issue justified judicial interference.
Two Show Cause Notices for the Same Tax Period
Another issue concerned the issuance of two separate show cause notices for the same tax period, although the notices apparently dealt with different issues.
The petitioners contended that this aspect also required examination by the GST authorities.
The High Court did not finally decide whether multiple notices relating to the same tax period were legally permissible. Instead, it directed that the issue should remain open for consideration after giving the petitioners an adequate opportunity to submit detailed responses.
This approach ensures that the taxpayers and legal representatives have an opportunity to place all relevant factual and legal objections before the adjudicating authority.
Adjudication Orders and DRC-07 Summaries Quashed
After examining the matter, the Karnataka High Court quashed the adjudication orders dated December 22, 2025, together with the corresponding summaries issued in Form GST DRC-07.
However, the Court did not permanently terminate the GST proceedings against the deceased proprietor’s estate or legal representatives. Instead, the proceedings were restored, with the son and wife being granted an opportunity to file detailed replies to the respective show cause notices.
The Court left all their legal and factual contentions open for consideration by the competent authorities.
Key Takeaway for GST Taxpayers
The decision provides an important reminder that GST recovery must have a clear statutory foundation. Tax authorities cannot automatically transfer the liabilities of one taxable person to another separate legal entity.
The judgment is particularly significant for cases involving proprietorship businesses, death of proprietors, legal representatives, family-owned businesses and companies having similar names or business connections.
At the same time, the ruling does not mean that GST dues of a deceased proprietor automatically disappear upon death. Proceedings against the estate or legally responsible persons must comply with the applicable provisions, including Section 93 of the CGST/KGST Acts.
The case therefore highlights two important principles: a separate company cannot ordinarily be made liable for the GST dues of an unrelated proprietary concern, and proceedings against legal representatives after the proprietor’s death must follow the statutory framework.
Case: BKR Services Private Limited v. Santoshkumar Rudraswamy
Case No.: W.P. No. 21878 of 2026 (T-RES)
Court: Karnataka High Court
Judge: Justice B. M. Shyam Prasad
Counsel for Petitioners: B.G. Chidananda Urs
Counsel for Respondents: K. Hema Kumar, AGA