In the recent ruling in State of Himachal Pradesh and Others vs M/s A J Infrastructures Pvt. Ltd. and Another, a two-judge Bench of the Supreme Court of India held that Section 16B of the Himachal Pradesh General Sales Tax Act, 1968 (HP GST Act) is not in violation of any provision of law including the SARFAESI Act and the Constitution of India.
The Bench of Supreme Court Justices S. Ravindra Bhat and Dipankar Datta, overturned the judgment of the Himachal Pradesh High Court, which had declared that Section 16B of the HP GST Act was inconsistent with Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and ultra vires the provisions of the Constitution of India.
Section 16B of the HP GST Act establishes that regardless of any contrary provision in any current law, any tax amount, penalty, or interest owed by a dealer or any other person under the Act will be the first charge on the property of the dealer or such other person.
The provision states that notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax and penalty including interest, if any, payable by a dealer or any other person under the HP General Sales Tax Act, shall be a first charge on the property of the dealer or such other person.
The top court has noted that the appeal filed by the State against the High Court’s decision became partly infructuous since PNB, a contesting respondent in the case, had already recovered its dues and released the property from its hypothecation during the pendency of the writ petition before the High Court.
The Apex Court Bench of Justice S Ravindra Bhat and Justice Dipankar Datta thus held that the High Court had made a ruling on an infructuous writ petition and had unjustifiably outlawed the rightful Section 16B of the HP GST Act. The bench stated that since the writ petition was rendered infructuous before the High Court’s ruling, it was unnecessary for the High Court to determine the validity of Section 16B.
The Supreme Court of India also examined whether the dismissal of the review petition/application for recall instituted by the State by the High Court suffers from any infirmity, legal or otherwise. It was held that the High Court was justified in rejecting the application for recall as no error apparent on the face of the record was pointed out, while seeking the review.
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