2016 (3) TMI 1144 - HC - Indian Laws

Responsibility of banks to verify whether proper stamp duty has been paid on all instruments executed - can bank officers can be adjudicating officers under the stamp act - Validity of Maharashtra Tax Laws (Levy and Amendment) Act, 2013 insofar as it enacts the Stamp Act Amendment (Exhibit A) - whether ultra vires and void on account of being viiolative of Article 14 of the Constitution and being beyond the legislative competence and power of the Stte Legislature and also for being vague, arbitrary and irrational and be pleased to quash the same - Held that - We do not see how by the obligation under the Banking Stamp Act, 1958, which is extremely limited and restricted and equally in public interest can it be said that the State legislature has overreached or has taken over taken over or interfered with the field occupied by the Banking Regulation Act, 1949 Once there is a wide discretion and latitude in the Legislature, then, it would be apparent that the financial institutions such as banks, non-banking financial company, housing finance company or alike deal with large number of instruments. These instruments are in favour of or executed by such entities. It came to the notice of the State that in relation to such instruments and which are of the nature referred to in clause (a) to (g) of section 30, the proper stamp duty has not been collected. Therefore, section 30A was inserted by Maharashtra Act No.8 of 2013 with effect from 1st May, 2013. The Statement of Objects and Reasons to this amendment would indicate as to how there was a revenue loss. We find that both sections of the Maharashtra Stamp Act, 1958, and the Registration Act, 1908, read and understood so also interpreted in the above manner need not be struck down. While arriving at the above conclusion, we have taken the aid and assistance of the very principles which have been pressed into service by Mr. Tulzapurkar. We need not advert to each and every judgment relied upon by counsel. We have referred to the very principles and which are enunciated in the case of State of Madhya Pradesh vs. Rakesh Kohli & Anr. (2012 (5) TMI 262 - SUPREME COURT OF INDIA ) about constitutional validity of taxing statutes. We are not in agreement with Mr. Tulzapurkar that the provisions of the Stamp Act and particularly, section 30A need to be struck down on the anvil that they violate the mandate of Articles 14, 19(1)(g) and 300A of the Constitution of India. We do not think that section 30A is in any way on par with section 73 of the Andhra Act which was under consideration in the case of District Registrar and Collector, Hyderabad vs. Canara Bank 2004 (11) TMI 569 - SUPREME COURT . Nonetheless, none of the principles that we have referred above would run counter to the paragraphs in this judgment and heavily relied upon by Mr. Tulzapurkar. When the banks and financial institutions are not required to perform the functions of the nature enunciated in this judgment, then, we need not refer to it any further. - Writ petitions dismissed - Decided against the banks.

Summary

Issues Involved:

1. Constitutional validity of the Maharashtra Tax Laws (Levy and Amendment) Act, 2013, specifically the Stamp Act Amendment.
2. Constitutional validity of the Maharashtra Act No. X of 2012, specifically the Registration Act Amendments.
3. Validity of the Circular dated August 8, 2013, issued by the Respondent No.2.
4. The obligation imposed on banks and financial institutions to ensure proper stamp duty payment and impound instruments with deficient stamp duty.

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Maharashtra Tax Laws (Levy and Amendment) Act, 2013:

The petitioners challenged the Stamp Act Amendment, asserting it violated Article 14 of the Constitution by imposing obligations solely on banks and financial institutions. They argued it was discriminatory and beyond the legislative competence of the State Legislature. The court held that the amendment did not interfere with the Banking Regulation Act, 1949, and was within the State's competence under Entry 63 of List II and Entry 44 of List III of the Seventh Schedule of the Constitution. The court found the classification reasonable and aimed at facilitating revenue collection, thus not violating Article 14.

2. Constitutional Validity of the Maharashtra Act No. X of 2012:

The petitioners argued that the Registration Act Amendments were repugnant to Section 58(f) of the Transfer of Property Act and violated Article 14. The court noted that the amendments aimed to protect the interests of banks and financial institutions and the public by ensuring the registration of agreements relating to the deposit of title deeds. The court found no conflict with the Transfer of Property Act and upheld the amendments as within the legislative competence of the State.

3. Validity of the Circular dated August 8, 2013:

The petitioners contended that the Circular issued by Respondent No.2 was ultra vires, void, and invalid. The court observed that the Circular merely informed banks and financial institutions about the amendments and did not impose any additional obligations beyond the statutory provisions. Therefore, the Circular was not found to be ultra vires or invalid.

4. Obligation Imposed on Banks and Financial Institutions:

The petitioners argued that the obligation to ensure proper stamp duty payment and impound instruments with deficient stamp duty was arbitrary, irrational, and imposed an unreasonable burden. The court held that the obligation was a ministerial act and did not require banks to perform any adjudicatory functions. The court found that the provisions facilitated revenue collection and did not impose an excessive or unreasonable burden on banks and financial institutions. The court also noted that the penalty for failure to impound instruments was a civil liability and not a criminal penalty, thus not violating any fundamental rights.

Conclusion:

The court dismissed the writ petition, upholding the constitutional validity of the Maharashtra Tax Laws (Levy and Amendment) Act, 2013, and the Maharashtra Act No. X of 2012. The court found that the amendments were within the legislative competence of the State, did not violate Articles 14, 19(1)(g), or 300A of the Constitution, and facilitated the collection of revenue without imposing an unreasonable burden on banks and financial institutions. The Circular dated August 8, 2013, was also found to be valid. The court granted time until July 1, 2016, for compliance with the statutory obligations under the amended provisions.