The Supreme Court has recently held that State cannot use the Himachal Pradesh Land Revenue Act, 1954 (HPLR Act) to recover sales tax dues as arrears of land revenue by creating a charge on the mortgaged property under Section 16B of the HP General Sales Tax Act.
In favour of the assessee, it was noted that the proceedings under the HPLR Act were not initiated after issuing notice to the defaulters and the amount owed to the department was not yet finally determined and held that the State cannot use the HPLR Act to recover sales tax dues without first notifying the defaulters and determining the final amount owed.
It was also clarified that the Section 16B of the Himachal Pradesh GST Act applies only after determining the liability and when a sum becomes due and payable under the Act. It is only then that the State’s charge on the property, if any, would take effect.
Section 16B of the HP GST Act provides 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 Himachal Pradesh General Sales Tax Act, shall be a first charge on the property of the dealer or such other person.
The Two-Judge Bench of Supreme Court Justices S Ravindra Bhat and Dipankar Datta noted that, “While adopting such a stand, the State and its department either overlooked or were ignorant of the requirement of law that section 16B would be attracted only after determination of the liability and upon any sum becoming due and payable; and that, it is only thereafter that the charge, if any, would operate.”
It was thus held that, “question of taking recourse to the HPLR Act for recovery of dues as arrears of land revenue did not arise.”
It was also clarified that, “Without such determination of liability, no red entry marks could have been inserted in the revenue records and the High Court was right in holding that the State ought not to have refused mutation.”
In the same case, it was also ruled by the apex court that the 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 or Constitution of India.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
