2018 (1) TMI 567 - HC - Indian Laws

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 office of the Registrar of Companies. The entries in the Schedule VII extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. If the entry 63 applies to instruments, it will extend to all subsidiary and ancillary matters connected with the said entry. Section 7 of the said Act which deals with copies of the instruments has a direct and substantial connection with the said entry 63. The said entry cannot be given a restricted meaning and interpretation 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 Sub section 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 the State for doing something on the basis of the rights and liabilities created by it. The legislative intent is to ensure that there is no evasion of duty on such instruments. The provision is to levy only a differential duty. There is no double taxation. We, therefore, reject the argument that Section 7 read with Section 19 in so far as the same apply to the copies of the instruments are not constitutionally valid. Hence, the petitions must fail. The writ petitions are accordingly rejected.

Issues Involved:

1. Constitutional validity of Section 7 of the Bombay Stamp Act, 1958.
2. Levy of stamp duty on copies of instruments executed outside Maharashtra but received in Maharashtra.
3. Interpretation of Sections 3, 7, and 19 of the Bombay Stamp Act, 1958.
4. Legislative competence of the State Legislature to levy stamp duty on copies of instruments.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 7 of the Bombay Stamp Act, 1958:

The petitioners challenged the constitutional validity of Section 7, arguing that it was beyond the legislative competence of the State Legislature to levy stamp duty on copies of instruments. They contended that Entry 63 of List-II of Schedule VII of the Constitution pertains only to instruments and not copies thereof. The court, however, upheld the validity of Section 7, stating that the entry should be interpreted broadly to include ancillary or subsidiary matters, thus encompassing copies of instruments. The court emphasized that Section 7 ensures no evasion of stamp duty by executing instruments in states with lower duty and then using copies in Maharashtra.

2. Levy of Stamp Duty on Copies of Instruments Executed Outside Maharashtra but Received in Maharashtra:

The court examined whether copies of instruments executed in Gujarat and received in Maharashtra for registration of charge were liable for stamp duty under the Bombay Stamp Act. The court referred to Section 7, which mandates that if the original instrument would have been chargeable with a higher rate of duty in Maharashtra, the same duty applies to the copy when received in Maharashtra. The court concluded that differential stamp duty was payable on the copies of the deeds brought into Maharashtra for registration of charge under Section 125 of the Companies Act.

3. Interpretation of Sections 3, 7, and 19 of the Bombay Stamp Act, 1958:

The court analyzed Sections 3, 7, and 19 to determine the applicability of stamp duty on copies of instruments. Section 3 charges duty on instruments executed within or received in the state. Section 7, a charging section, provides for higher duty on copies if the original instrument would attract higher duty in Maharashtra. Section 19 deals with instruments executed outside and received in Maharashtra. The court held that Section 7, by legal fiction, makes Section 19 applicable to copies, thus requiring payment of differential duty on such copies.

4. Legislative Competence of the State Legislature to Levy Stamp Duty on Copies of Instruments:

The petitioners argued that the State Legislature lacked competence to levy stamp duty on copies of instruments, as the relevant constitutional entries pertained only to instruments. The court rejected this argument, citing precedents that entries in legislative lists should be interpreted broadly to cover ancillary matters. The court held that Entry 63 of List-II includes copies of instruments, thus validating the State Legislature's power to levy duty on them.

Conclusion:

The court dismissed the petitions, upholding the constitutional validity of Section 7 and confirming that differential stamp duty was payable on copies of instruments executed outside but received in Maharashtra. The court emphasized a broad interpretation of legislative entries to prevent evasion of stamp duty and ensure comprehensive coverage of related matters. The interim orders were extended for ten weeks, and no costs were awarded.

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