Citius Real Estate (P) Ltd. v. Union of India

RAWAL decision of the Supreme Court in Government of Andhra Pradesh & Ors. v. P. Laxmi Devi (Smt.)3 in support of the aforesaid contention. He submitted that the refund in the petitioner’s case was squarely barred by the provisions of Section 54(c) of the Act as the application for refund was filed beyond the period of six months from the date of purchase of E-stamp paper.

REASONS & CONCLUSION

13. There is no cavil that the Act is a taxing statute. Section 3 of the Act expressly provides that subject to the provisions of the Act and exemptions contained in Schedule I, the instruments as specified shall be chargeable with duty of an amount as indicated in the said Schedule.

14. Section 2(6) of the Act defines the expression ‘chargeable’ as under:- “(6) “Chargeable” means, as applied to an instrument executed or first executed after the commencement of this Act, chargeable under this Act, and, as applied to any other instrument, chargeable under the law in force in [India] when such instrument was executed or, where several persons executed the instrument at different times, first executed;”

15. Section 2(12) of the Act posits the expression ‘executed’ and ‘execution’ when used with refence to an instrument to mean ‘signed’ and ‘signature’.

16. Section 2(14) of the Act defines the term ‘instrument’ as under:- “(14) “instrument” (a) every document, by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; (b) a document, electronic or otherwise, created for a transaction in a stock exchange, or depository by which any right or liability is, or purports to be, created, transferred, limited, extesssnded, extinguished or recorded; and

(c) any other document mentioned in Schedule I, but does not include such instruments as may ssbe specified by the Government, by notification in the Official Gazette;”

17. It is settled law that stamp duty is chargeable on the instruments as stipulated in the said Schedule and not the transactions in respect of which the instrument is executed.

18. Section 9A of the Act also specifies the instruments chargeable with duty for transactions in stock exchanges and depositories.

19. Section 10 of the Act contains provisions as to how the stamp duties are to be paid. Section 11 of the Act provides for the use of adhesive stamps. Sections 10 and 11 of the Act are set out below:

31. Section 49 of the Act provides for allowance for spoiled stamps. In terms of Clause (a) of Section 49 of the Act, a Collector can make an allowance in respect of a stamp inadvertently and undesignedly spoiled, obliterated or by error in writing or any other means rendered unfit for the purpose intended, prior to the instrument being executed. Further, an application for allowance is required to be made within the period as prescribed under Section 50 of the Act.

32. Although, a Collector can make an allowance for the stamp paper only if an application is made within the period as prescribed. The life of the stamp paper is not circumscribed by Section 54(c) of the Act. In Thiruvengadam Pillai v. Navaneethammal & Anr.5, the Supreme Court had observed as under:

33. Thus, there is no impediment in using the stamp paper for discharge of stamp duty payable on an instrument even after the period as specified under Section 54(c) of the Act has expired. There is considerable merit in the petitioner’s contention that there is an anomaly in restricting the time period for seeking an allowance under Section 54 of the Act to only six months after the stamp paper has been purchased when compared with the time period available for making an application in respect of stamps that are spoiled, obliterated or rendered unfit for use. In terms of Section 50(2) of the Act, an application for relief under Section 49 of the Act in respect of stamp paper on which no instrument has been executed can be filed within a period of six months after the stamp has been spoiled. Thus, if the provisions of Sections 54(c) and 50(2) of the Act are juxtaposed, it would be clear that a person would be entitled to file an application for refund of stamp duty two months after the stamp paper has been spoiled notwithstanding, that more than six months have elapsed after the stamp was purchased, but he cannot apply for refund in respect of RAWAL the stamp paper that is in a pristine condition after six months of the date of purchase of the said paper.

34. In the present case, the petitioner has been denied the refund as the condition under Section 54(c) of the Act has not been satisfied. However, if the stamp papers available with the petitioner are inadvertently obliterated or spoiled, the petitioner would have two months thereafter to apply for a refund of the stamp paper due. In our view, if the provisions of Section 54 of the Act are read in the aforesaid manner, the same are clearly arbitrary and unreasonable and are liable to be declared as ultra vires Article 14 of the Constitution of India.

35. It is a well settled that a legislative enactment is presumed to be constitutionally valid unless it is found to be contrary. Additionally, it is also a well settled principle that the courts will, in so far as possible, construe a statute in a manner so that it does not fall foul of the constitution.

36. It is also trite that the period of limitation does not extinguish the obligation, it merely extinguishes the recourse to remedies[6]. The substratal rationale is to deny a person his recourse to courts and remedies, if he has otherwise not exercised the same within a reasonable period.

6 Bombay Dyeing Manufacturing Co. Ltd. v. State of Bombay & Ors.: 1957 OnLine SC 7 RAWAL

37. Section 54 of the Act is required to be construed bearing the aforesaid principles.

38. A plain reading of Section 54 of the Act indicates that it is applicable only in cases where stamp duty is not of immediate use. Additionally, three conditions are required to be satisfied. First, that the stamp was purchased with a bona fide intention for using the same. Second, that the applicant has paid full price for the same. And third, that the stamp was purchased within the period of six months, next preceding the date on which the same were delivered.

39. In Rajeev Nohwar v. Chief Controlling Revenue Authority, Maharashtra State, Pune & Ors[7], the Supreme Court had interpreted Section 52 of the Maharashtra Stamp Act, 1958 which is similarly worded as Section 54 of the Act, in the following manner:

23. However, Section 52 would only apply to those cases where the applicant had knowledge that the stamp purchased was not be required for use within six months from the date of purchase. The provision cannot be arbitrarily applied to cases where the purchaser of the stamp had no knowledge that the stamp would not be required for use within six months from the purchase of the stamp. In the instant case, the appellant had no knowledge of the fact that the stamp was not needed within six months from the purchase of it. He was in a bona fide contest over his rights with the builder. Therefore, the case of the appellant would not fall under Section 52 of the Act as well.” RAWAL

40. In Rajeev Nohwar’s[7] case the appellant had purchased the stamp paper on 16.08.2014 for the purpose of execution of an Agreement to Sell in respect of a residential flat booked by him. Since, the disputes had arisen between the appellant and the builder and the said stamps were not used, the appellant filed a complaint before the National Consumer Redressal Forum which was disposed of on 06.05.2016 (approximately two years later). The appellant was given an option to either purchase the said residential flat or receive the refund of the amount paid along with interest and compensation. Since, the appellant elected to receive a refund from the builder and did not go ahead with the purchase of the residential unit, the E-stamp certificate purchased by him was no longer useful. He thus, applied for refund of the stamp paper immediately thereafter on 16.07.2016. The Supreme Court read the provisions of Section 50(2) of the Maharashtra Stamp Act, 1958 – which, as noted above, is identically worded as Section 54 of the Act – and held the same to be confined to only those cases where the applicant was aware that the stamp would not be of use within the period of six months of its purchase, either because the purpose for which the same was purchased has been abandoned, or there was a delay of six months in executing the same. In the facts of the said case, the Supreme Court held that the appellant had no knowledge that the stamp purchased would have no use within the period of six months from its purchase and allowed the refund.

41. The facts in the present case are not dissimilar. The petitioner in this case had no knowledge that its application for purchase of RAWAL agricultural land would not be processed and the transaction for purchase of the subject property would not be consummated within the period of six months. The petitioner had thus waited for the permission. It applied for the refund after it was ascertained that the permission / NOC from the concerned authority was not forthcoming.

42. Undisputedly, if Section 54 of the Act is understood in the manner as explained by the Supreme Court in Rajeev Nohwar’s[7] case, the said provision cannot be construed as arbitrary. It does not in any manner conflict with the scheme of Section 50 of the Act read with Section 49 of the Act.

43. Allowance for stamps are available in cases that fall under Section 49 of the Act provided that an application is made within the time as prescribed under Section 50 of the Act. This would include cases where the charging event has not occurred, that is, an instrument has not been executed. It would also cover cases where an instrument has been engrossed on the stamp paper but the transaction has not been consummated by one of the parties as contemplated under Section 49(d)(5) of the Act.

44. A person who holds an unused stamp paper is also entitled to apply to the Collector for a refund of the same within the period of six months upon his becoming aware that the same would not be of immediate use during the said period. However, this highlights a gap in the statutory provisions in respect of a case, where a person with the bona fide intention purchases the stamp paper by making full payment RAWAL for the same and discovers after a period of six months that the stamp paper is of no use. In light of the decision of Supreme Court in Rajeev Nohwar[7], Section 54 of the Act is not applicable to such a case as the person purchasing the stamp duty did not have the knowledge, within the period of six months of purchasing the stamps, that the stamps purchased would be of no immediate use. If the contentions advanced by the respondents are accepted, then such a person would have no remedy to seek any allowance in respect of the stamp paper.

45. We are unable to accept that the legislative intention of the Act was to exclude such a person from claiming any allowance in respect of an unused stamp paper. Thus, the controversy raised by the petitioner arises because of absence of any unambiguous provisions for refund in the given case.

46. Article 265 of the Constitution of India proscribes levy of collection of tax except by authority of law. The Act is a law and therefore, it is erroneous to contend that the collection of duties is without authority of law. The lack of express provisions for refund of stamp duty under the Act is required to be tested on the anvil of other provisions of the Constitution of India.[8]

47. In the aforesaid regard it is relevant to refer to the case of Committee-GFIL v. Libra Buildtech Private Limited & Ors.9. In the said case, the applicants had purchased the stamp paper and handed Mafatlal Industries Ltd. v. Union of India: (1997) 5 SCC 537 (2015)16 SCC 31 RAWAL them over to the Committee constituted by the Supreme Court in the case of Securities and Exchange Board of India v. Golden Forests India Limited.10 referred to as (GFIL Committee) in respect of affairs of Golden Forests India Limited. The sale deeds in respect of certain properties were executed on the stamp paper, however, the possession of the properties was not handed over to the applicants. Subsequently, the transactions were cancelled by the High Court as GIFL Committee was not in a position to hand over the possession of the properties sold to the applicants. The Court also directed GFIL Committee to refund the amount deposited by the applicants. GFIL Committee challenged the orders by filing a Special Leave Petition before the Supreme Court. The refund of stamp duty was denied by the Collector on the ground that the application was filed beyond the period of six months. As noted above, the stamp papers were purchased on 02.09.2011, the sale deeds were executed on 23.12.2011 and the application for a refund was made on 22.10.2012 and 02.11.2012. The Supreme Court directed the authority to refund the entire stamp duty. The relevant extract setting out the reasons which persuaded the Court to direct the refund of stamp duty is set out below: -

30. Even apart from what we have held above, when we examine the case of the applicants in the light of Sections 49 and 50 of the Act, we find that the case of the applicants can be brought under Section 49(d)(2) read with Section 50(3) of the Act to enable the State to entertain the application made by the applicants seeking refund of stamp duty amount. The interpretation, which advances the cause of justice and is based on the principle of equity, should be preferred. We hereby do so.”

48. In the case of National Investor Forum Regd v. Golden Forests India Ltd.11, GFIL Committee invited bids for the purchase of 1398 kanal and 3 marla of land in district Panchkula, which included a partially constructed tourist complex. The applicant in the said case was the highest bidder and the bid was confirmed in its favour. The applicant had thereafter deposited ₹2,50,02,000/- towards the stamp duty and the stamp paper for the aforesaid amount was also purchased. However, the transaction fell through as 21 kanal and 12 marla of land were not included in the site plan of the parcel of land on which the resort was to be constructed and was advertised for sale. 11 CM APPL.15884/2013 in W.P.(C) No.1399/2010 decided on 26.09.2014 RAWAL The sale confirmed in favour of the applicant was cancelled and GIFL Committee was directed to refund the consideration received. The applicant also applied to the Sub-Divisional Magistrate, Panchkula for the refund of the stamp duty. However, the same was denied on the ground that the application was filed approximately one year, six months after the date of the purchase of the stamp paper. In that case the paper was purchased on 10.04.2012 and the application for refund was made on 10.10.2013. In the following context, this Court held as under:

49. In Dr. Poornima Advani’s[1] case, the applicant sought a refund of the stamp duty amount of ₹28,10,000/- on account of the loss of Estamp certificate. The said application was rejected on the ground that the there was no provision in the Act for the refund of stamp duty in cases wherein, the E-stamp was lost. The learned Single Judge had construed the expression ‘obliterate’ as used in Section 49(a) of the Act to include the cases where the stamp paper had been lost. The Court also referred to the principle that it would be open for the Court to supplement the text of the statute to give effect to the legislative intent.

50. The Government of NCT of Delhi appealed the decision of the learned Single Judge before the Division Bench of this Court. However, the said appeal was dismissed by an order dated 18.03.2019 (Govt. of NCT & Anr v. Dr. Poornima Advani & Anr.12 ). The Division Bench of this Court upheld the judgment passed by the learned Single Judge and held as under: -

51. As noticed above, the charging event for levy of stamp duty is the execution of an instrument chargeable to duty. As also noticed above, the Act contains provisions for refund of stamps that are either LPA No.188/2019 RAWAL spoiled or remain unused. Duty levied on the instruments recording a transaction that has been rendered void, is also refundable.

52. Given the scheme of the Act, there is no doubt that the legislative intent is to refund the stamp duty to refund the amount paid for the purchase of stamps if the same are not used or cannot be used for discharging of the liability to pay stamp duty. As noted above refund of duty is provided even in cases where the stamp duty is paid on execution of the instrument but the transactions are subsequently held to be void. However, as noted above, there is lacuna in as much as it does not expressly provide for the refund of unused stamps where the cause of action for seeking refund in respect of unused stamps has arisen after the period of six months. As observed by the Supreme Court in Rajeev Nohwar’s[7] case, Section 52 of the Maharashtra Stamp Act, 1958 (which is similarly worded as Section 54 of the Act) is applicable only in cases where the applicant had knowledge that the stamp purchased would not be used within a period of six months from the date of purchase. Thus, the words ‘immediate use’ as used were read in the context of the limitation period as prescribed by the said provision. The words ‘immediate use’ are interpreted to mean the permanent abandonment of the purpose for which the stamps were purchased or a delay of more than six months for the purpose for which it was purchased.

53. We are of the view that denial of refund of the stamp duty collected even though no duty is payable because the charging event RAWAL has not occurred and the cause of action for claiming the refund has not arisen, militates against the scheme of providing for allowance of stamps. Clearly, if the provisions of the Act are construed in a manner so as to permit collection and retention of stamp duty, which is not chargeable without any recourse for refund whatsoever, it would run contrary to the scheme of the Act. If Section 54 of the Act is read as restricting the right for seeking refund in a case such as the present one, it would suffer from the vice of arbitrariness and fall foul of Article 14 of the Constitution of India.

54. However, as noted above, it is well settled that an enactment must be presumed to be constitutionally valid and the court must make every effort to uphold the constitutional validity of the statute13 “even if it requires giving a statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the court declare a statute to be unconstitutional14.

55. In Seaford Court Estates Ltd. v. Asher15 Lord Denning had held as under: “when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament … and then he must supplement the written word so as to give “force and life” to the

13 State of Bihar v. Bihar Distillery Ltd.: (1997) 2 SCC 453 paragraph 17 Govt of AP v. P Laxmi Devi: (2008) 4 SCC 720 (1949) 2 All ER 155 at 164 RAWAL intention of the legislature …. A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.”

56. In M. Pentiah v. Muddala Veeramallappa16: the Supreme Court had concurred with the proposition set out in the aforesaid passage from the decision in Seaford Court Estates Ltd. v. Asher15. The Court had also referred to the following proposition from Maxwell17 and held that the same was well established:

57. In Ahmedabad Municipal Corporation and Anr. v. Nilaybhai

RAWAL Gujarat High Court that Rule 7 of the said rules for admission to Smt. N.H.L. Municipal Medical College was violative of Articles 14 and 15 of the Constitution of India insofar as it confined the definition of “the local students” to students who had passed their SCC examination and the qualifying examination from the institutions located within the limits of Ahmedabad Municipal Corporation. Thus, the students who had completed their qualifying education located just outside the municipal limits were not treated as local students and thus, were excluded from seeking sssadmission as local students. However, the Supreme Court effectively re-wrote Rule 7 of the concerned rules, to save the same from the vice of Article 14 and also included students who had completed their qualifying education from schools and colleges situated within the Ahmedabad Urban Development Area within the definition of the local students. The relevant extract of the said decision reads as under: “13. Though the High Court was right in coming to the conclusion that the rule in question does suffer from an element of arbitrariness, we are of the opinion that the remedy does not lie in striking down the impugned rules the existence of which is necessary in the larger interest of the institution as well as the populace of the Ahmedabad Municipal Corporation. The striking down of the rule would mean opening the doors of the institution for admission to all the eligible candidates in the country which would definitely be opposed to the very object of the establishment of the institution by a local body. It is very rarely that a local body considers it as its duty to provide higher and professional education. In this case, the Municipality of Ahmedabad should be complimented for providing medical education to its resident students for the last 30 years or more. It has RAWAL complied with its constitutional obligation by providing 15% of the seats available to all-India merit students. Its desire to provide as many seats as possible to its students is a natural and genuine desire emanating from its municipal obligations which deserves to be upheld to the extent possible. Therefore, with a view to protect the laudable object of the Municipality, we deem it necessary to give the impugned rule a reasonable and practical interpretation and uphold its validity.

14. Before proceeding to interpret Rule 7 in the manner which we think is the correct interpretation, we have to bear in mind that it is not the jurisdiction of the court to enter into the arena of the legislative prerogative of enacting laws. However, keeping in mind the fact that the rule in question is only a subordinate legislation and by declaring the rule ultra vires, as has been done by the High Court, we would be only causing considerable damage to the cause for which the Municipality had enacted this rule. We, therefore, think it appropriate to rely upon the famous and oft-quoted principle relied on by Lord Denning in the case of Seaford Court Estates Ltd. v. Asher [(1949) 2 All ER 155 (CA)] wherein he held: “When a defect appears a Judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, … and then he must supplement the written word so as to give ‘force and life’ to the intention of the legislature. … A Judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A Judge must not alter the material of which the Act is woven, but he can and should iron out the creases.” This statement of law made by Lord Denning has been consistently followed by this Court starting in the case of M. Pentiah v. Muddala Veeramallappa [AIR 1961 SC 1107] and followed as recently as in the case of S. Gopal Reddy v. State of A.P. [(1996) 4 SCC 596, 608: 1996 SCC (Cri) 792: AIR RAWAL 1996 SC 2184, 2188] (SCC at 608: AIR at p. 2188). Thus, following the above rule of interpretation and with a view to iron out the creases in the impugned rule which offends Article 14, we interpret Rule 7 as follows: “Local student means a student who has passed HSC (sic SSC)/New SSC Examination and the qualifying examination from any of the high schools or colleges situated within the Ahmedabad Municipal Corporation limits and includes a permanent resident student of the Ahmedabad Municipality who acquires the above qualifications from any of the high schools or colleges situated within the Ahmedabad Urban Development Area.”

58. A plain reading of Section 54(c) of the Act indicates that it provides for a period of six months for claiming refund from the date when the stamp duty was purchased. However, this provision has no application if the person is not aware that he has no immediate use for the stamp paper within the said period [as held by the Supreme Court in Rajeev Nohwar[7] ]. It is also apparent that the legislative intent is not to usurp the amount deposited for payment of stamp duty where no such duty is chargeable. As noticed hereinbefore, even in the cases where the stamp paper is faulted or obliterated, the legislature has made express provision for allowing of refund within a period of six months from the date that the stamps are spoiled or obliterated which may be beyond the period of six months from the date the stamps are purchased.

59. As stated above, if the provisions of Section 54(c) of the Act are read in a manner as is contended on behalf of the Revenue, refund of duty would be admissible in case of a stamp paper that is spoiled RAWAL beyond the period of six months of its purchase but no refund would be admissible in respect of an unspoiled stamp beyond the said period, even though the cause of action for seeking a refund has not arisen. We are unable to accept this interpretation. We are of the view that the language of Section 54 of the Act does admit an interpretation where the provisions of Section 54(c) of the Act are applicable only in cases where the person seeking a refund is aware, within a period of six months from the date of the purchase of the stamps, but he is aware that he has no immediate use of the stamps within a period of six months from the date of its purchase. The said requirement of Section 54(c) of the Act would be inapplicable in cases where the applicant is not aware that he would have no immediate use of the stamp paper within a period of six months from the date of its purchase. In National Investor Forum11, a Coordinate Bench of this Court had observed that it saw no bar in per se grant of refund in the given circumstances. This Court had also observed that the limitation ought to be reckoned from the date when the cause for refund arises and not from the date when the stamp paper is procured.

60. The question that arises is that what would be the period of limitation if the provisions of Section 54(c) of the Act are inapplicable. In State of Punjab & Ors. v. Bhatinda District Cooperative Milk Producers Union Ltd.19, the Supreme Court held that in cases where the period of limitation is not prescribed, the

RAWAL application must be made within a reasonable period. In case no time is provided for an Act, the same must be done in a reasonable period. What would be a reasonable period must be construed in the context of the provisions of the Act. Section 54(c) of the Act and Section 50 of the Act indicate that the legislative intent to confine the period for seeking allowance to not exceed six months after the cause of action has arisen. Thus, in cases where the applicant applies for refund of unused stamps/stamp certificate within a period of six months of becoming aware that he has no immediate use of the same, the claim for refund cannot be stated to be delayed and must be admitted. This is, obviously, subject to the applicant satisfying clauses (a) and (b) of Section 54 of the Act– the Stamps must have been purchased for full consideration with the bonafide purpose to use them.

61. In the present case, it was not contested that the petitioner had applied for a refund immediately after becoming aware that the NOC for purchasing the subject property was not forthcoming.

62. The petitioner’s claim can be looked at with another perspective. It is apparent that the petitioner had purchased the stamps under a mistaken belief that the NOC for the subject property would be forthcoming and had sought the refund immediately on being aware of the said mistake. As noted above, there is no dispute that the taxing event has not occurred, thus, the petitioner had no liability to pay the stamp duty which has been paid by it. Plainly, no such amount could be recovered if the petitioner had not purchased the stamp certificate.

RAWAL The instrument chargeable to tax was never executed and thus, the stamp duty collected was not chargeable. As stated above, the refund of such tax is not covered under the Act. It is well settled that the person paying tax, which is not payable, under a mistake is entitled to the refund of such tax if the same is not proscribed by the statue, either expressly or by necessary implication. The limitation as provided under the relevant Act may not strictly apply, if the refund is not covered under the enactment.

63. In Commissioner of Sales Tax. U.P v. Auriaya Chamber of Commerce, Allahabad20, the Supreme Court had upheld the decision for refund of sales tax paid under a law, which was declared as invalid. The taxpayer’s claim for refund was held to be within the period of limitation notwithstanding, that the refund applications were not made within two years, of payment of such tax. The Supreme Court reckoned the period from the date on which the law was declared as invalid. The Supreme Court also observed as under:

64. In Shri Vallabh Glass Works Ltd. & Anr. v. Union of India & Ors.21, the Supreme Court had modified the orders passed by the High Court and also granted refund of tax for a period of three years prior to filing of the petition challenging the validity of levy, on the basis of the limitation for a suit provided under the Limitation Act, 1963. The Supreme Court noted that if a suit had been filed by the appellants, the period of limitation would begin from the date when the appellants had discovered the mistake under which excess duty was paid.

65. In view of the above, we dispose of the present petition by directing the Collector to process the petitioner’s claim for the refund of stamp paper (to the extent of 90% of the E-stamp paper) within a period two weeks from date.

66. The petition is disposed of in the aforesaid terms. The pending application is also disposed of.

VIBHU BAKHRU, J AMIT MAHAJAN, J NOVEMBER 23, 2023 ‘gsr’/RK