The Himachal Pradesh High Court has granted interim protection to a former partner of a partnership firm by restraining the State Tax Department from taking coercive recovery action against him until the statutory appeal filed by the reconstituted partnership firm is decided.

The bench of Justice Jyotsna Rewal Dua clarified that it was not examining the merits of the tax dispute but found it appropriate to protect the petitioner while the appeal challenging the underlying tax demand remains pending. 

The writ petition was filed by Ramesh Chand challenging a recovery notice dated September 9, 2024, issued by the State Tax Department. The petitioner contended that the dispute pertained to M/s Biologic Inc, a partnership firm in which he had previously been a partner. According to him, the partnership had subsequently been reconstituted with a new partner, and he had ceased to be associated with the business. The newly constituted partnership firm had already preferred a statutory appeal against the tax demand before the competent appellate authority. 

Buy Now: GST Judgements E-Compilation – June 2026

The petitioner argued that since the appeal against the demand was pending, recovery proceedings against him should not continue until the appellate authority decided the matter. 

During the proceedings, the Assistant Commissioner, State Taxes & Excise, Nahan, personally appeared before the Court and explained the Department’s stand.

The Department informed the Court that the partnership firm had originally been registered under the Himachal Pradesh VAT Act, 2005 and the Central Sales Tax Act, 1956. It consisted of two real brothers, each holding a 50% share, including the petitioner. The firm continued in the same constitution until June 30, 2017, and thereafter migrated to the GST regime without any change in its constitution. 

The authorities further submitted that assessments for the tax periods 2015-16 to 2017-18 were finalized on September 1, 2023, resulting in an additional tax demand of ₹43.94 lakh. Out of this amount, approximately ₹10.78 lakh had already been recovered. The remaining dues were declared arrears of land revenue under Section 75 of the Himachal Pradesh Land Revenue Act, 1954, following which recovery proceedings were initiated. Since both partners belonged to Karnal, Haryana, the recovery proceedings were also forwarded to the District Collector, Karnal. 

The State also relied upon Sections 25, 26 and 27 of the Himachal Pradesh VAT Act, asserting that all partners are jointly and severally liable for payment of tax, interest and penalty arising from the firm’s liabilities. 

The petitioner pointed out that the reconstituted partnership firm had already filed a statutory appeal challenging the tax demand. Although the appeal had been filed with a delay of about 30 months, it was pending consideration before the appellate authority and had been listed for hearing on August 3, 2026.

The State did not dispute the pendency of the appeal before the competent authority. 

After considering the submissions of both parties and the instructions placed before it, the High Court chose not to examine the legality of the tax demand or the recovery proceedings at this stage.

Recognizing that the statutory appeal challenging the demand was awaiting adjudication, the Court held that it would be appropriate to protect the petitioner from coercive recovery until the appeal was decided. 

The High Court disposed of the writ petition by directing that no coercive action shall be taken against the petitioner on the basis of the recovery notice dated September 9, 2024, until the time-barred statutory appeal filed by the partnership firm is decided by the competent appellate authority. 

The Court expressly stated that this protection was granted without expressing any opinion on the merits of the dispute. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Service Tax Recovery from Deceased Proprietor’s Widow Quashed: Chhattisgarh High Court