Failure to Notify GST Commissioner About Retirement Makes Ex-Partner Liable: Punjab & Haryana High Court

Failure to Notify GST Commissioner About Retirement Makes Ex-Partner Liable: Punjab & Haryana High Court

Introduction

The Punjab and Haryana High Court has held that failure to notify the GST Commissioner about a partner’s retirement makes the ex-partner liable for the firm’s GST dues. The Court stressed strict compliance with Section 90 of the CGST Act, 2017, which governs the liability of partners.

Factual Background

A partnership firm was constituted by the petitioner/assessee along with other partners, including Puneet Singla, Deepak Nagpal, and Gurvinder Singh. The firm operated from land rented from the assessee and Gurvinder Singh. Over time, several partners retired and new partners were inducted through retirement deeds and reconstitution deeds.

The assessee claimed that he retired from the firm on 20 April 2021 and had no involvement thereafter.

Procedural Background

For the assessment year 2023–24, the State Tax Officer issued a DRC-07 order, followed by a notice to the assessee and another partner, Raswinder Singh (the assessee’s real brother). The assessee challenged the order before the High Court.

Contentions of the Parties

Assessee’s Contentions:

• He had retired in April 2021 and thus could not be held liable for the firm’s GST dues.
• Claimed that the firm itself was responsible for informing the GST Commissioner.
• Argued that he had no access to the GST portal after retirement, as the login credentials remained with the existing partners.

Department’s Contentions:

• Section 90 of the CGST Act, 2017 requires written notice of retirement to the Commissioner within one month.
• In the absence of such intimation, liability continues until the Commissioner receives it.
• Asserted that no evidence showed the assessee made any effort to notify the authorities himself.

Court’s Analysis

The Court noted that Section 90 explicitly extends a firm’s GST liability to all its partners until proper intimation of retirement is filed. The bench found no proof that the assessee took any steps to ensure notification to the Commissioner, despite the fact that his own brother remained an active partner in the firm.

Reasoning & Analysis

Justices Lisa Gill and Sudeepti Sharma held that the assessee’s failure to notify the GST Commissioner within one month meant that his liability continued by operation of law. The Court stressed that the burden to ensure notification lies with the retiring partner, regardless of internal firm arrangements.

Implications

The ruling serves as a cautionary precedent for all retiring partners — failing to notify the GST Commissioner in writing can result in continuing liability for the firm’s future GST obligations.

Outcome

The High Court dismissed the petition, holding the assessee liable for the firm’s GST dues.

Appearance: In this case the petitioner was represented by Mr. Amit Gupta, Advocate. Meanwhile the respondent was represented by Mr. Saurabh Kapoor, Advocate.