B.K.MEHTA, M.P.THAKKAR, S.OBUL REDDI - (1.) This suo motu reference made by the Chief Controlling Revenue Authority under sub-sec. (1) of sec. 54 of the Bombay Stamp Act 1958 (hereinafter called the Stamp Act) as applicable to Gujarat highlights an instance of partial legislative misfire which has resulted in a situation where a document liable to stamp duty having been already acted upon the revenue is not able to collect the duty which ought to have been paid on it or to enforce its payment. This has happened because the loophole which enabled a party to escape from payment of differential stamp duty on account of the different rates of stamp duty prevailing in the State of Gujarat on one hand and the other States was plugged to an extent by making a provision for charging the duty but the Legislature failed to carry out its object completely inasmuch as it failed to make a provision in respect of collection of such duty if the document was already acted upon.
(2.) The history of the matter culminating in the present reference requires to be stated briefly. The Nutan Mills Limited (hereinafter referred to as the Company) is a public limited Company having its registered office at Ahmedabad. A Charge in relation to its immovable properties situated at Ahmedabad was created in favour of the Bank of Baroda by issuance of debentures. In respect of this transaction a Debenture Trust Deed was executed between the Company on one hand and the Bank of Baroda at Bombay on the other. The Company approached the competent authority at Bombay for adjudication with regard to the proper stamp duty payable thereon in accordance with the Stamp Act applicable to the State of Maharashtra. In accordance with the adjudication stamp of Rs. 67 516 was affixed on the document in question. Now even though the properties on which the charge was created are situated at Ahmedabad it is permissible under the relevant provisions of law to have the Trust Deed registered at Bombay under the Indian Registration Act. But as per the requirement of sec. 125 of the Indian Companies Act of 1956 the document by which the charge is created or evidenced or a copy thereof verified in the prescribed manner is required to be filed with the Registrar of Companies at Ahmedabad for registration under provisions of the Indian Companies Act. As the law provides that the Company can produce either the document in original or a copy thereof the Company produced a copy of the original instrument verified in the prescribed manner before the Registrar of Companies Gujarat at Ahmedabad. The Registrar of Companies realised that even though the original instrument was executed in Bombay inasmuch as it related to properties situated in Gujarat the instrument was liable to stamp duty in Gujarat for the amount representing the duty payable at the Gujarat rate (which was higher) and the duty payable as per the Maharashtra rate having regard to sec. 19 of the Stamp Act. It is common ground that if the original instrument had been brought to Gujarat differential duty would have been payable on the aforesaid basis as per sec. 19 of the Stamp Act and that the duty would have to be paid within three months after it was received in the State as provided in sec. 18 of the Act. But then what was produced before the Registrar of Companies was not the original instrument but a verified copy thereof as it was permissible to do so having regard to the provision contained in sec. 125 of the Indian Companies Act. So far as the copy was concerned sec. 7(1) was attracted and on a copy of the document according to the revenue duty was payable on the same footing as was payable on the original when it was received in the State. And the copy if it vas chargeable with duty under sec. 7 read with sec. 19 was not admissible in evidence under could not have been acted upon or registered by any public Officer unless it was duly stamped. Now the Registrar of Companies before whom the Company produced the copy of the Debenture Trust Deed was aware of the fact that the copy required to be stamped when it was received in Gujarat. It appears that even so instead of refusing to act upon it the Registrar of Companies registered the charge in the relevant registers maintained by him. He however sent the copy to the Superintendent of Stamps for appropriate action. The Registrar of Stamps addressed a letter to the Company on September 10 1971 (Annexure C) and called upon the Company to explain why the document was registered in Bombay though the properties were situated in Ahmedabad and to explain why the differential stamp duty was not paid up within three months of the receipt of the copy in Gujarat. After taking into account the explanation offered by the Company and hearing the advocate of the Company the Collector and Assistant Superintendent of Stamp Gujarat State Ahmedabad by his order Annexure F dated January 15 1972 directed the Company to make good the differential stamp duty of Rs. 67 500 which represented the difference between stamp duty payable at the Gujarat rate and the duty payable at the Maharashtra rate as also a sum of Rs. 32 500 by way of penalty. Thereupon the Company invoked the revisional jurisdiction of the Chief Controlling Revenue Authority (hereinafter referred to as the Revenue Authority) by way of an application under sec. 53 of the Act. The Revenue Authority was of the opinion that the determination made by the Collector was proper but in exercise of the suo motu powers under sec. 54(1) of the Stamp Act he made a reference to the High Court and sought the opinion of the High Court on the following two questions : (1) Whether a copy of an instrument produced under sec. 125 of the Companies Act is an Instrument chargeable with duty under sec. 7(1) read with sec. 19 and sec. 2 of Bombay Stamp Act 1958 ? (2) Whether the Collector & Assistant Supdt. of Stamps was right in impounding the copy of the instrument and ordering levy of duty and penalty under the provisions of secs. 33 and 39 of the Bombay Stamp Act 1958 ?
(3.) Now so far as the first question referred to the High Court by the Revenue Authority is concerned the question posed is in substance regarding the claim of the revenue that even a copy of an instrument creating a charge in regard to the property situated in Gujarat is liable to payment of differential stamp duty as is payable on the original instrument when it comes to Gujarat having regard to the fact that the duty payable under the Stamp Act applicable to Gujarat is higher than the duty payable under the Act applicable to Maharashtra. Now it is not in dispute that if the original instrument by which the charge was created at Bombay in respect of the property situated in Gujarat was received in Gujarat it would have been liable to differential stamp duty at the rate representing the difference between the Gujarat rate and the Maharashtra rate when the instrument is received in Gujarat having regard to secs. 18 and 19) of the Stamp Act. Sec. 19 in so far as material reads as under : 19 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 (a) the amount of duty chargeable on such instrument shall be the amount of duty chargeable under Schedule I on a document of the like description executed in this State less the amount of duty if any already paid under any law in force in India excluding the State of Jammu and Kashmir on such instrument when it was executed; (b) and in addition to the stamps if any already affixed thereto such instrument shall be stamped with the stamps necessary for the payment of the duty chargeable on it under clause (a) of this section in the same manner and at the same time and by the same person 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 xx xx xx xx The Original instrument creating the charge if it were received in the Gujarat State would attract the differential stamp duty Representing the difference between the Gujarat rate and the Maharashtra rate in view of the aforesaid provision. This position is not disputed by the Company for it is incapable of being disputed. In the present ease however what has been received in Gujarat is a copy of the original instrument by which charge was creaked In regard to such a copy it is claimed by the revenue that differential duty is payable even on such a copy even if the original instrument is not received in Gujarat. Reliance is placed in this connection on sec. 7 of the Act which is in the following terms: 7 (1) Notwithstanding anything contained in sec. 4 or 6 or 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 would when received in this state have been chargeable under this Act with a higher rate of duty be the duty with which the principal or original instrument would have been chargeable under sec. 19. (b) Notwithstanding anything contained in any enactment for the lime being in force no instrument counterpart duplicate or copy chargeable with duty under this section shall be received in evidence unless the duty chargeable under this section has been paid thereon: provided that any Court before 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. On a plain reading of sub-sec. (1) of sec. 7 it is clear that even a copy of an instrument is liable to differential duly which would be chargeable in respect of the original instrument under sec. 19. It is evident that sub- sec. (1) of see. 7 is a charging section in respect of counterparts duplicates and copies (the reference to Counterparts and duplicates is in the context of secs. 4 and 6 of the Act with which we are not concerned in the present ease. The expression copy of any instrument covers a situation like the present where instead of original instrument creating a charge a copy thereof is received. The whole purpose of sub-sec. (1) of sec. 7 appears to be to meet a situation like the present where the law provides for production of either the original instrument or a copy and in order to avoid payment of duty a party instead of producing or receiving the original instrument might produce or receive a copy thereof. Learned counsel for the Company under the circumstances did not contend that the copy of the original instrument was not liable to differential stamp duty under sub-sec. (1) of sec. 7 if the copy was received in Gujarat. It must be realised that the manifest purpose of sec. 19 is to discourage persons from executing document outside the State of Gujarat in relation to property situated in Gujarat merely because the duty payable in Gujarat is at a rate higher than the duty payable in other States And see. 7 has been enacted for the manifest purpose of achieving the same goal in the context of a counterpart a duplicate or a copy of an instrument. We have therefore no doubt that even a copy of any instrument which is liable to differential stamp duty under sec. 19 is liable to such duty in view of sub-sec. (1) of sec. 7. Counsel for the Company however contends that though sub-sec.(1) of sec. 7 so provides for payment of duty and can be construed as a charging section it does not provide as to when the duty would become payable. In other words it is argued that whilst sub-sec. (1) of case. 7 refers to the chargeability of the copy to differential duty treating it as if the original document was received in the State the section does not provide for the time of payment of duty or the point of time at which the liability would be attracted. We are unable to accede to this submission for such a construction would render the provision ineffective and purposeless. In our opinion sub-sec. (1) of sec. 7 clearly provides that a copy of the instrument will attract a differential duty at the same rate as provided in sec. 19 and also at the same point of time when the original would have been liable to such stamp duty viz. when received in this State. The Legislature has incorporated by reference the same liability in respect of a copy as existed in respect of the original instrument in the context of sec. 19 by employing the expression the duty with which the principal or original instrument would have been charged under sec. 19. So also the element as regards the point of time when the liability would arise has been incorporated by employing the expression original instrument would when received in this State have been chargeable under this Act. It is therefore clear that sub-sec. (1) of sec. 7 has enveloped both the concepts viz. as regards the rate at which the duty is payable and with regard to the point of rate at which the duty is payable by placing the liability at par with the liability attracted by the original instrument both in regard to the rate as well as in regard to the point of time. And the point of time which is contemplated by sec. 19 and sec. 7 is the point of time when the original instrument or a copy of the original instrument is received in the State of Gujarat. There is therefore no difficulty in answering the first question in the affirmative subject to the clarification that the Revenue Authority has used the expression instrument in a loose manner in framing the question for the copy of an instrument would not fall within the description instrument as defined by sec. 2(1) of the Act. As to whether or not the document will fall within the definition of instrument under sec. 2 is another question to which we shall presently address ourselves for though no pointed question in this behalf has in terms been referred to us incidentally this aspect would reqUire consideration in the context of the second question which has been referred to us viz. the question as to whether the Collector was right in impounding the copy of the instrument and ordering lavy of the duty and penalty under the provisions of secs. 33 and 39 of the Act. ;