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Apex Court upholds Sec 16B of HP GST Act, dismisses HC verdict

Shimla, May 3

The Supreme Court of India recently overturned a judgment made by the Himachal Pradesh High Court in the case of State of HP versus A J Infrastructures. The division bench of the apex court, consisting of Justices S. Ravindra Bhat and Dipankar Datta, reversed the high court’s verdict that Sec. 16B of the HP GST SARFAESI Act was ultra vires to the Constitution’s provisions.

In an order passed on May 1, the Supreme Court stated that Sec. 16B of the HP GST Act establishes that, despite any conflicting provision in current law, any tax amount, penalty, or interest owed by a dealer under the Act should be the first charge on the dealer’s property. The court ruled that this section of the GST Act is not in violation of any provision of law, including the SARFAESI Act and the Constitution of India.

The bench gave the final verdict, stating that any amount of tax and penalty, including interest payable by a dealer or any other person under the Act, should be a first charge on the property of the dealer, notwithstanding anything to the contrary contained in any law for the time being in force.

The Supreme Court also examined whether the dismissal of the review petition for recall instituted by the High Court suffered from any infirmity, legal, or otherwise. The court 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.

The decision also mentioned that the Special Leave Petition filed became partially 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 in the High Court.

The apex court’s order stated that the High Court had made a ruling on an infructuous writ petition and had unjustifiably outlawed the rightful Sec. 16B of the HP GST Act. The court ruled that since the petition was rendered infructuous before the High Court’s ruling, it was unnecessary for the court to determine the validity of Sec. 16B.


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