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The Indian Hume Pipe Co. Ltd., Mr. Bhaskar S. Nadkarni, Reliance Industries Limited, & Others Versus State of Maharashtra.

2018 (1) TMI 567 - BOMBAY HIGH COURT

Constitutional validity of section 7 of the Bombay Stamp Act, 1958 - declaration is sought that the provisions of sections 3, 7 and 19 of the said Act to the extent to which the same seek to levy stamp duty on the copies of the instruments executed outside the State of Maharashtra are null and void - Held that:- The deeds were chargeable in the State of Gujarat as the same are executed in the said State. Copies of the same are received in the State of Maharashtra for registering a charge in the .....

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which is contrary to the law laid down by the Apex Court. Liberal construction will have to be put so that it can be of a wide amplitude. The entry 63 will encompasses in itself even copies of instruments. - Moreover, clause (b) of Sub­section 1 of Section 7 is intended to ensure that no one evades the stamp duty payable on an instrument under the said Act by executing and stamping the original in another State where a lesser stamp duty is payable and thereafter, bring a copy thereof within .....

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cted. - WRIT PETITION NO. 2519 OF 1988, 2488 OF 1988, 2534 OF 1988, 2194 OF 1988, 2280 OF 1988, 215 OF 1989, - Dated:- 9-1-2018 - A.S.OKA AND SMT.VIBHA V. KANKANWADI, JJ. Mr. Santosh Bharucha with Mr. Shrey Fatterpaker i/b. D.F. & Diwan for the petitioners in WP No.2519/1988. Mr. Mustafa Doctor, Senior Advocate with Mr. Abhinav Chandrachud i/b. Mulla & Mulla for the petitioners in WP No.2280/1988. Mr. Milind Sathe, Senior Advocate with Mr. Vikramaditya Deshmukh, Mr. Amey Nabar and Ms. Re .....

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y A.S.Oka, J as per Rule 296(iii) Chapter XX of the Bombay High Court (Original Side) Rules.] JUDGMENT : (Per A.S.Oka, J.) 1. Writ Petition No.2488/1988 was not on board. By consent of parties the said petition was taken up on the board. These petitions can be disposed of by a common judgment. One of the common challenges in these petitions is to the constitutional validity of section 7 of the Bombay Stamp Act, 1958 (for short the said Act ). A brief reference to the facts of the case will be ne .....

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are the parties to the said deed. The State Bank of India is a trustee. A mortgage of the immovable properties of the first petitioner company was made under the deed with a view to secure the issue and allotment of the debentures of the first petitioner. As a substantial part of the mortgaged property was situated in the State of Gujarat, the deed was executed in the State of Gujarat and was stamped as per the law prevailing in the State of Gujarat (the Bombay Stamp Act,1958­as applicable .....

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7; 3,66,220/­ was made by the second respondent being the difference between the stamp duty payable on the said deed in the State of Maharashtra and the stamp duty paid in the State of Gujarat which is the subject matter of challenge in the petition. 3. In Writ Petition No.2488/1988, a similar deed was executed by the first petitioner­ company in the State of Gujarat. Stamp duty was paid and it was registered in the State of Gujarat. A copy of the said deed was filed with the Registrar o .....

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t levy and recovery of stamp duty in respect of copies of instruments. 4. In Writ Petition No.2534/1988, a similar deed was executed and registered in the State of Gujarat. A copy of the said deed was filed in the office of the Registrar of Companies in Mumbai for registration of charge as the registered office of the first petitioner is in Mumbai. Even in this case, a demand is made by the second respondent for payment of differential duty. The demand is for payment of difference between the du .....

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uted by the first petitioner­ company in the State of Gujarat. Stamp duty was paid and the deed was registered in the State of Gujarat as in other cases. A verified copy of the said deed was filed with the office of the Registrar of Companies at Mumbai pursuant to the provisions of the Companies Act for the purpose of registration of charge as the registered office of the first petitioner is in Mumbai. In this petition, the challenge is to the similar demand of difference in the duty. A pray .....

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he main ground on which the remand order was passed is that the challenge to the constitutional validity of section 7 of the said Act was not at all considered on merits. 8 With a view to appreciate the submissions made by the learned counsel for the parties, it will be necessary to make a reference to the provisions of the said Act as the same existed before it was amended by the Maharashtra Act No.XVII of 1993. The Sections which are relevant for our consideration are Sections 3, 7 and 19, whi .....

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Schedule I, which, not having been previously executed by any person, is executed out of the state on or after the said date, relates to any property situate, or to any matter or thing done or to be done in this State and is received in this State: Provided that no duty shall be chargeable in respect of­­ (1) any instrument executed by or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in res .....

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) Notwithstanding anything contained in section 4 or 6 or it any other enactment, unless it is proved that the duty chargeable under this Act has been paid,­­ (a) on the principal or original instrument, as the case may be, or (b) in accordance with the provisions of this section, the duty chargeable on an instrument of sale, mortgage or settlement other than a principal instrument or on a counterpart, duplicate or copy of any instrument shall, if the principal or original instrument wou .....

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which any such instrument, duplicate or copy is produced may permit the duty chargeable under this section to be paid thereon and may then receive it in evidence. 19. Payment of duty on certain instruments liable to be increased duty in Maharashtra State.­ Where any instrument of the nature described in any article in Schedule I and relating to any property situate or to any matter or thing done or to be done in this State is executed out of the State and subsequently received in the State, .....

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able on it under clause (a) of this section, in the same manner and at the same time and by the same persons as though such instrument were an instrument received in this State for the first time at the time when it became chargeable with the higher duty; and (c) the provisions contained in clause (b) of the proviso to sub­section (3) of section 32 shall apply to such instrument as if such were an instrument executed or first executed out of this State and first received in this State when i .....

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opy of the deed or a certified or a verified copy thereof is filed in the office of the Registrar of Companies in Mumbai as per the requirement of Section 125 of the Companies Act, it cannot be said that the original deed was received in the State of Maharashtra. It was urged that even the charging section i.e. Section 3 makes it clear that the stamp duty is chargeable, provided an instrument mentioned in Schedule­I to the said Act is executed out of the State and is received in the State. I .....

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ision of a Full Bench of the Gujarat High Court in the case of Chief Controlling Revenue Authority v. Nutan Mills Ltd. AIR 1978 Gujarat 1. It was pointed out that by Maharashtra Act No.XI of 1998, first proviso was inserted in Section 3 which provides that stamp duty will be payable even on a copy or facsimile image of an instrument, if full stamp duty on the original is not paid. It was submitted that this shows that till the Maharashtra Act No.XI of 1998 came into force, stamp duty was not pay .....

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Schedule VII of the Constitution of India deals with the rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, etc. It was contended that the entry 91 is only in respect of instruments and hence, entry 63 of List­II which deals with rates of stamp duty in respect of documents other than those specified in the provisions of List­I is in relation to instruments and not any document. It was submitted that .....

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le only on the instruments. Relying upon the decision of the Apex Court in the case of Bhopal Sugar Industries v. D.P.Dube AIR 1964 SC 1037, it was submitted that the State Legislature is powerless to enact a law providing for levy of stamp duty on a document which is not an instrument. Relying upon the decision of the Apex Court in the case of Bar Council of Uttar Pradesh v. State of U.P. (1973) 1 SCC 261, it was urged that both Entry 91 of List­I and Entry 63 of List­II are empowering .....

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and not a copy thereof. 10. The learned Special Counsel for the State of Maharashtra relied upon the decision of the Apex Court in the case of New Central Jute Mills Co. Ltd. v. State of West Bengal AIR 1963 SC 1307. He relied upon paragraph16 of the said decision. He submitted that liability will arise when the instrument is executed in one State is used for doing things in another State. In such a case, the liability to pay stamp duty will arise in both the States. Inviting our attention to S .....

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ed that even without amendment to Section 3 made by adding a proviso, stamp duty was always leviable on a copy of the instrument covered by clause (b) of sub­section (1) of Section 7 of the said Act. He submitted that in the present case, differential duty has been charged in accordance with Section 19 of the said Act. He submitted that even a true copy of the instrument which is executed in one State but which is used in another State will become an instrument for the purposes of the said A .....

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instrument as contained in clause (l) of Section 2 of the said Act reads thus: 2. Definitions. In this Act, unless there is anything repugnant in the subject or context.­ ….. ….. ….. ….. ….. …. ….. ….. (l) instrument includes every documents by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of la .....

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tions, a mortgage of immovable properties was created in favour of a bank or a consortium of banks by way of security for the debentures and the interest payable thereon. Stamp duty was paid on the deeds in the State of Gujarat. We may note here that Chapter­II of the said Act has the heading Stamp Duties . Chapter­II has five sub­headings. Under sub­heading (A) styled as Of the Liability of Instruments to Duty , Sections 3 to 9 are included. Section 3 which we have quoted above .....

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the instruments was not on the statute book. Section 4 provides that where, in case of any sale or mortgage or settlement, several instruments are employed for completing the transaction, only the principal instrument is chargeable with duty prescribed in Schedule­I and each of the other instruments shall be chargeable with a duty of ten rupees instead of the duty prescribed for it in the Schedule­I. Section 5 provides that any instrument comprising or relating to several distinct matter .....

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certain instruments . Sub­section (1) of section 7 starts with a nonobstante clause which seeks to override Sections 4 and 6 or any other enactment. Thus, in a way, this Section is by way of an exception to Sections 4 and 6. It provides that unless it is proved that the duty chargeable under the said Act has been paid, (a) on the principal or original instrument, as the case may be, or (b) in accordance with the provisions of this section, the duty chargeable on instrument of sale, mortgage .....

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been paid on the original deeds. As stated earlier, the deeds create a mortgage in respect of immovable properties of the first petitioner Companies in Gujarat. It is also not in dispute that the deeds subject matter of these petitions, if received in the State, would have been chargeable under the said Act with a higher rate of duty. Sub­section (1) of Section 7 provides that in case of a copy of any such instrument, stamp duty under the said Act will be payable which is equivalent to the d .....

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rovides for payment of duty on a copy of the instrument. The duty is payable, provided if the principal or the original instrument executed outside the State, when received in the State, would have been chargeable for stamp duty under the said Act with a higher rate of duty. It is true that Section 19 by itself does not provide for payment of stamp duty on a copy of the instrument. But sub­section (1) of Section 7 which is a charging section, by a legal fiction makes Section 19 applicable to .....

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perty situate or to any matter or thing done or to be done in the State is executed out of the State and is subsequently received in the State. In such a case, an amount of duty chargeable on such instrument shall be the amount of duty chargeable under Schedule­I on a document of the like description executed in this State less the amount of duty, if already paid under any law in force in India. As stated earlier, Section 7 which is a charging section specifically provides that the duty unde .....

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quidator or creditors unless registered.- (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914 , by a company and being a charge to which this section applies shall, so far as any security on the company' s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenc .....

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, if the company satisfies the Registrar that it had sufficient cause for not filing the particulars, and instrument or copy within that period. (2) Nothing in subsection (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge. (3) When a charge becomes void under this section, the money secured thereby shall immediately become payable. 14. As pointed out earlier, Section 3 as well as Section 7 of the said Act are charging sections. The deeds in this c .....

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f charge as provided in Section 130 of the Companies Act. Thus, in the cases in hand, copies of the deeds executed outside the State were brought into State for a thing to be done in the State. In the circumstances, in view of Section 7 read with Section 19 of the said Act, differential stamp duty was payable on the verified copies of the deeds in question brought into the State and submitted to the Registrar of Companies at Mumbai in accordance with Section 125 read with section 130 of the Comp .....

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completely a different field. It will apply when the original document is executed in the State but stamp duty is not paid on the same. In such a case, stamp duty will be payable on a copy of such instrument. 16. At this stage, we may make a useful reference to the decision of the Full Bench of the Gujarat High Court in the case of Chief Controlling Revenue Authority v. Nutan Mills Ltd. (supra). There were two questions framed which were referred to the Full Bench, which read thus: (1) Whether a .....

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he Gujarat High Court held that a copy of the instrument produced under Section 125 of the Companies Act though is not an instrument within the meaning of the said Act would be chargeable with the difference between the duty payable in accordance with sub­section (1) of Section 7 read with Section 19 of the said Act and the duty payable under the Bombay Stamp Act as applicable to the State of Gujarat. The Full Bench clarified that such a copy of the original instrument cannot be called as an .....

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ns deal with the instruments chargeable with duty. Section 33 deals with power of every person having by law or by consent of parties an authority to receive evidence. It confers power on such person, if he finds that the instrument produced before him is not duly stamped, to impound the said document. Section 35 provides that no instrument chargeable with the duty shall be admitted in evidence for any purpose by any person having by law an authority to receive evidence unless such document is d .....

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thereon is fully paid. Therefore, the said decision will not help the petitioners. 18. In the case of Hariom Agrawal v. Prakash Chand Malviya (supra), the Apex Court was dealing with a photostat copy of the instrument/ agreement produced as a secondary evidence when on the original document proper stamp duty was not paid. The question was whether such a copy can be impounded under the provisions of the Indian Stamp Act as amended by the Madhya Pradesh amendment. After considering the provisions .....

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nce of duty was payable on the copies of deeds, which were filed under Section 125 of the Companies Act, in the light of the provisions of Section 7 read with Section 19 of the said Act. In fact none of the decisions interpret Section 7 of the said Act or a provision which is pari materia thereto. 20. Now, the other issue survives for our consideration is regarding the constitutional validity of Section 7 in so far as it is applicable to the copies of the documents. It was pointed out that Entry .....

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in Entry 63 of List­II will have to be construed as an instrument. It was submitted that even according to the provisions of the Indian Stamp Act, stamp duty is leviable only on the instruments. Relying upon the decision of the Apex Court in the case of Bhopal Sugar Industries v. D.P.Dube (supra),it was submitted that the State Legislature is powerless to enact a law providing for levy of stamp duty on a document which is not an instrument. Relying upon the decision of the Apex Court in the .....

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ll be ultra vires the Entry 63 of List­II. Relying upon the decision of the Apex Court in the case of Sushil Kumar v. State of Haryana (supra), it was urged that the word instrument can only include the original document and not a copy thereof. 21. Entry 91 of List­I reads thus: 91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. Entry 66 of Lis .....

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e said Act refers only to an original instrument and not to a copy of an instrument. The argument is that both the above entries in Schedule VII relate only to instruments and not the copies thereof and therefore, the provision of section 7 of the said Act lacks legislative competence in so far as it seeks to levy stamp duty on copies of instruments. 22. In several decisions, the Apex Court has laid down the lawrelating to the interpretation of various entries in the Lists in the Schedule VII. T .....

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rder to see whether a particular legislative provision falls within the jurisdiction of the legislature which has passed it, the Court must consider what constitutes in pith and substance the true subject-matter of the legislation and whether such subject-matter is covered by the topics enumerated in the legislative list pertaining to that legislature. In the case of Offshore Holdings (P) Ltd. v. Bangalore Development Authority (2011) 3 SCC 139, the Apex Court held thus: 67. The entries in the l .....

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stitution Bench of this Court in Ujagar Prints (2) v. Union of India [(1989) 3 SCC 488] described these entries and also stated the principles which would help in interpretation of these entries. While enunciating these principles, this Court held as under: (SCC pp. 512-13, para 48) 48. Entries to the legislative lists, it must be recalled, are not sources of the legislative power but are merely topics or fields of legislation and must receive a liberal construction inspired by a broad and gener .....

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e taken to be legislation on the topic. 70. This Court, while referring to the principles of interpretation of entries in the legislative lists, expanded the application to all ancillary or subsidiary matters in Jijubhai Nanabhai Kachar v. State of Gujarat [1995 Supp (1) SCC 596] and held as under: (SCC p. 609, para 7) 7. It is settled law of interpretation that entries in the Seventh Schedule are not powers but fields of legislation. The legislature derives its power from Article 246 and other .....

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t is impugned, there is an initial presumption of its constitutionality and if there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved, as far as possible in favour of the legislature putting the most liberal construction upon the legislative entry so that it may have the widest amplitude. This line of interpretation had been stated in Hoechst Pharmaceuticals Ltd. v. State of Bihar [(1983) 4 SCC 45] and followed in different judgments of this .....

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ative competence. It is now well settled that Parliament can not only enact a law for avoidance or evasion of commission of an illegal trade but also may make law to see that the law is not evaded by taking recourse to machination or camouflage. The loopholes, if any, in such matters can and should be plugged. Means affecting means principle as adumbrated in United States v. Darby [312 US 100 : 85 L Ed 609 (1941)] is an illustration on the point. Both substantial and procedural provisions can be .....

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