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TMI Blog2009 (8) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant Rules. Therefore, the third petitioner is not a works contractor. If the veil is lifted, it is clear that the builder is building and selling flats to prospective buyers and the sale consideration is received in instalments. But, agreements are made to appear the transaction to be one of works contract. If it is a works contract and the owner is constructing a building in his property, no duty can be levied on the building constructed because no transfer takes place. A legislation cannot be invalidated by simply saying that its provisions are arbitrary, unless the challenge is referable to specific violation of any constitutional provision. The payment or the liability to pay stamp duty will not, in any way, affect the rights of the first petitioner or its members to carry on the business of development of lands or building flats. Petition dismissed - decided against petitioner. - WP(C).No. 17794 of 2007(R) - - - Dated:- 28-8-2009 - MR. K.BALAKRISHNAN NAIR MR. C.T.RAVIKUMAR, JJ. For Appellant :SRI.P.R.VENKETESH For Respondent :GOVERNMENT PLEADER ORDER Balakrishnan Nair, J. The main point that arises for decision in these cases i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.15 of 2007 to the Kerala Stamp Act, 1959 (Act No.17 of 1959) is produced in the writ petition as Ext.P6.. Section 2 of Act 15 of 2007 deals with the amendment to the Act. The impugned amendments are those relating to Articles 5 (3), 21, 22 and 44(f) of the Schedule to the Act. The amendment introduced to Article 5 reads as follows: 5. Agreement or memorandum of an agreement. xxx xxx xxx xxx xxx xxx (c) if relating to giving authority or power to a promoter or The same duty as a conveyance developer by whatsoever name (under 21 or 22 as the case may called, for construction, be) on the value or the estimated development or sale or transfer cost of proposed construction/ (in any manner whatsoever) of development of such property, as any immovable property. the case may be. Article 21, after the amendment reads as follows: 21. Conveyance (as defined by Six rupees for every ₹ 100 or section 2(d), other than a part thereof of the amount or value of the consideration for such conveyance specified in conveyance. No.22, not being a provided that if the conveyance relates to any transfer transfer charged or of undivided share of any land and exempted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit. 5. We heard learned Senior Counsel Sri.Aravind Dattar and also learned counsel M/s.P.R.Venkitesh and S.Ananthakrishnan for the petitioners. We also heard M/s. K.I.Mayankutty Mather and Millu Dandapani, learned counsel who appeared in the connected writ petitions. The learned Special Government Pleader, Sri.N.Manoj Kumar appeared for the State and supported the impugned amendments. The learned Senior Counsel took us through item 63 of List II and Item 44 of List III of the Seventh Schedule to the Constitution. Reference was also made to item 91 of List I of the Seventh Schedule to the Constitution. Stamp duty is a duty on an instrument executed. Article 5 of the Schedule read with Section 3 of the Act enables levy of stamp duty on an instrument of agreement. The word 'agreement' is not defined in the Stamp Act. So, the definition of 'agreement' under the Indian Contract Act can be followed. Article 5(c) in the Schedule to the Act enables the State to levy duty on execution of an agreement, giving authority for construction etc., at the same rate as could be levied on a conveyance under Articles 21 or 22 of the Schedule, on the value for the estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the competency of the State Legislature. Without amending the definition of conveyance, something not a conveyance is treated as a conveyance and duty is sought to be levied. Such an attempt is without authority. The learned Senior Counsel also submitted that any such attempt of the State will offend Articles 14 and 19(1)(g) of the Constitution of India. In support of his submissions, the learned Senior Counsel relied on the following decisions, viz. Gannen Dunkerley and Co., v. State of Madras, (AIR 1954 Madras 1130); State of Madras v. Gannen Dunkerley and Co., AIR 1958 SC 560, Hindustan Lever v. State of Maharashtra, (2004) 9 SCC 438, M/s. Govind Saran Ganga Saran v. Commissioner of Sales Tax, AIR 1985 SC 1041, State of Rajasthan v. Rajasthan Chemists Association, (2006) 6 SCC 773, Chief Controlling Revenue Authority v. Sudarsanam Pictures, AIR 1968 Madras 319, Chief Controlling Revenue Authority v. Dr.K.Manjunatha Rai, AIR 1977 Madras 10. The above decisions are cited in support of the submission that, something which has nothing to do with conveyance, as defined under Section 2(d) of the Kerala Stamp Act, cannot be taxed treating the same as conveyance, by amending the Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land or enter into agreement with the land owner, construct flats in the land and sell them to third parties along with the undivided share in the land. The amount is collected in instalments from the purchaser. Though it would appear that the person who purchased the undivided share is building the flat engaging the builder, in fact, it is the other way. The builder is building the flat and selling it to the buyer on payment of its value in instalments. Tax was being evaded, on the conveyance of such flats. To plug such evasion of tax, the amendments were introduced. If the State legislature has competence to levy duty on the instrument of conveyance, it has also the power to enact provisions to plug evasion of stamp duty. The learned Government Pleader undertook that, stamp duty will not be levied from the works contractors, who execute work contracts, but duty will be levied only from persons who enter into agreements in the nature of Exts.P1 to P3 and execute power of attorney in the nature of Ext.P4. A close scrutiny of Exts.P1 to P4 would show that the sale of property and sale of flat takes place, but duty is paid only for the conveyance of undivided share in the land. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea having 950 square feet. As per the agreement, the fifth petitioner undertook to pay the charges for construction in accordance with the payment schedule. If there is default, the third petitioner is entitled to collect the defaulted amount with 12% interest. Clause 10 and 11 of Ext.P2 reads as follows: 10). The second party shall not do anything on the apartment which will affect the strength and support of the entire multi storeyed building or raise any construction or change the boundary peripheral area including elevation and exterior of the building either by addition or deletion than in a manner planned, built and handed over. 11). The Second Party shall not interfere with and shall not obstruct the common use of the stair cases and the common verandas, common places and the common facilities such as lifts, standby generator, septic tank, water tank etc. and the Second Party shall not cause any nuisance, obstructions and problems to the other owners of apartments. . Going by the above clauses, there is no reason for the third petitioner to include those conditions, if he is only a works contractor. Those conditions would show that the third petitioner is more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Honourable Supreme Court, in that context, observed as follows: The presence of intermediate contractors with whom alone the workmen have immediate or direct relationship ex-contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like may be resorted to when labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43A of the Constitution. The court must be astute to avoid the mischief and achieve the purpose of the law and not be misled by the 'maya' of legal appearances. . In this case also, if the veil is lifted, it is clear that the builder is building and selling flats to prospective buyers and the sale consideration is received in instalments. But, agreements are made to appear the transaction to be one of works contract. If it is a works contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle and interest may not have passed as such. Still, by reason of the fact that under the terms of the agreement, there is an intention of sale and possession of the property has also been delivered, it is certainly open to the State to charge such instruments at a particular rate which is akin to a conveyance. Therefore, it cannot be said that levy of duty is not upon the instrument but on the transaction. The object of the Explanation is clear that if an agreement is entered into and that agreement itself contemplates the delivery of possession of the property within the stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act. . In the case on hand also, there is a specific stipulation in Ext.P2 that the third petitioner will complete the construction of the flat by 31.12.2008 and handover possession within 90 days thereafter. 10. It is true, the legislation is causing some inconvenience to the first petitioner and its members and also the prospective buyers of flats from them, but the same is not a ground for annulling an enactment. An Act can be declared as unconstitutional, if only it viola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability'. The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; 'that exact wisdom and nice adaptation of remedy are not always possible' and that 'judgment is largely a prophecy based on meagre and uninterpreted experience. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secy. of Agriculture v. Central Rig Refinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld include tax on works contract also. Clause 29A was added to Article 366 of the Constitution of India by the said amendment. In Hindustan Lever v. State of Maharashtra, (2004) 9 SCC 431, the validity of the definition of Conveyance , which included orders made by the High Court under Section 359 of the Companies Act in respect of amalgamation, reconstruction of companies etc. had come up consideration. The validity of the said definition was upheld by the Apex court in the said decision. Relying on the said decision, it was contended that unless the definition of Conveyance in Section 2(d) of the Kerala Stamp Act is amended, there cannot be any levy and collection of stamp duty for instruments not covered by the definition of Conveyance. Reference was made to the decision of the Apex Court in State of Rajasthan v. Rajasthan Chemists Association, (supra), to contend that duty can be levied only for conveyance and not on something treating the same as conveyance. In the said decision, the Apex Court held that sales tax can be levied only on actual price of goods sold and not based on the maximum retail price printed on the goods. We feel that the above decisions cited by the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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