Himachal Futuristic Communications Limited Vs State of Rajasthan (Rajasthan High Court)
Held that as per the scheme of arrangement and amalgamation, the assets situated in the state of Rajasthan and required to be assessed by the statutory scheme of the Stamp Act of 1998.
Facts-
The appellant engaged in the business of manufacturing telecom equipment, optical fibre cables and also providing telecom turnkey services, entered into an arrangement and amalgamation of another company namely, Sunvision Engineering Company Private Limited. The High Court of Himachal Pradesh sanctioned the scheme of arrangement and amalgamation of Sunvision Engineering Company Private Limited with the appellant company. properties of Sunvision Engineering Company Private Limited were registered with the appellant company and equity shares were also allotted to the shareholders of Sunvision Engineering Company Private Limited. Sunvision Engineering Company Private Limited also owned 14 parcels of land situated in the State of Rajasthan.
Jaipur Development Authority sent the matter for legal examination, whereafter, the State Government, having examined the documents of amalgamation, formed an opinion that there was deficit of stamp duty. A demand was, therefore, raised against the appellant-company by issuing a notice under Section 51 of the Rajasthan Stamp Act, 1998.
The Deputy Registrar, after coming to the conclusion that as the valuation of 14 parcels of land was not possible there being no separate demarcation which would enable such valuation, vide order dated 07.03.2018, held the appellant-company liable for payment of a sum of Rs. 25 crores as stamp duty with the mutation of the records of JDA within 15 days, failing which action was contemplated in terms of Section 56 of the Stamp Act of 1998. Such a demand was raised on valuation arrived at Rs. 12,73,29,36,970/- of the entire document, i.e., the order passed by the High Court of Himachal Pradesh sanctioning the scheme of amalgamation and transfer of the assets of Sunvision Engineering Company Private Limited to the appellant-company. Aggrieved by the said order, the appellant-company filed writ petition before this Court.
Conclusion-
Held that firstly, there is no material on record placed by any of the parties to establish that the instrument-in-question was leviable to stamp duty under the State law in Himachal Pradesh. Secondly, irrespective of whether or not the appellant was liable to pay stamp duty in the State of Himachal Pradesh and whether or not it has been paid in that State, the stamp duty would be leviable only in respect of the properties situated in the State of Rajasthan and not in respect of transfer of shares under the instrument as that transfer by execution of instrument and passing of order by the High Court of Himachal Pradesh does not bear any territorial nexus.
We hold that the appellant would be liable for payment of stamp duty only on the market value of the properties situated in the State of Rajasthan required to be assessed in accordance with the statutory scheme of the Stamp Act of 1998. The demand for payment of stamp duty in excess of such liability is in excess of authority under the Stamp Act of 1998.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
This appeal is directed against order dated 07.06.2019 passed by the learned Single Judge, whereby, writ petition filed by the appellant-writ petitioner has been dismissed.
2. The appellant filed writ petition on pleadings inter alia that the appellant-company, registered under the Companies Act, 1956 at Solan, Himachal Pradesh and engaged in the business of manufacturing of telecom equipments, optical fibre cables and also providing telecom turnkey services, entered into an arrangement and amalgamation of another company namely, Sunvision Engineering Company Private Limited. Petition under Sections 391 and 394 of the Companies Act, 1956 was submitted before the High Court of Himachal Pradesh for sanctioning the scheme of arrangement and amalgamation of Sunvision Engineering Company Private Limited with the appellant-company. Vide order dated 05.01.2011, the High Court of Himachal Pradesh sanctioned the scheme. Transferor and Transferee companies were allowed to file copy of the order with the Registrar of Companies of the State of Punjab, Chandigarh and Himachal Pradesh and the transferor company was dissolved without process of winding up.
3. Further pleading was that as a result of sanction of the scheme of arrangement and amalgamation of Sunvision Engineering Company Private Limited with the appellant-company, the assets and properties of Sunvision Engineering Company Private Limited were registered with the appellant-company and equity shares were also allotted to the shareholders of Sunvision Engineering Company Private Limited in the ratio of 47 equity shares of value of Re. 1/- for every one share of Sunvision Engineering Company Private Limited having face value of Rs. 10/-. In this manner, 47 crore equity shares were issued to the shareholders of Sunvision Engineering Company Private Limited, which was holding one crore equity shares of the said company. Sunvision Engineering Company Private Limited also owned 14 parcels of land situated in the State of Rajasthan. These assets of Sunvision Engineering Company Private Limited were also transferred by virtue of order of the High Court of Himachal Pradesh in favour of the appellant-company, whereafter, the appellant-company approached Jaipur Development Authority (for short ‘JDA’) on 09.01.2017 seeking mutation of aforementioned 14 parcels of land situated at Shiv Nagar-II/Ramnagariya, Jaipur in the revenue records. JDA sent the matter for legal examination, whereafter, the State Government, having examined the documents of amalgamation, formed an opinion that there was deficit of stamp duty. A demand was, therefore, raised against the appellant-company by issuing a notice under Section 51 of the Rajasthan Stamp Act, 1998 (for short ‘the Stamp Act of 1998’) by registering the proceedings against the appellant-company. The appellant-company in that proceedings submitted that the stamp duty as payable for valuation of 14 parcels of land situated in the State of Rajasthan of which the appellant-company became owner by virtue of sanction order of the High Court of Himachal Pradesh, alone were required to be assessed for determination of stamp duty. A representation was submitted in response to notice dated 22.06.2017. The Deputy Registrar, after coming to the conclusion that as the valuation of 14 parcels of land was not possible there being no separate demarcation which would enable such valuation, vide order dated 07.03.2018, held the appellant-company liable for payment of a sum of Rs. 25 crores as stamp duty with the mutation of the records of JDA within 15 days, failing which action was contemplated in terms of Section 56 of the Stamp Act of 1998. Such a demand was raised on valuation arrived at Rs. 12,73,29,36,970/- of the entire document, i.e., the order passed by the High Court of Himachal Pradesh sanctioning the scheme of amalgamation and transfer of the assets of Sunvision Engineering Company Private Limited to the appellant-company. Aggrieved by the said order, the appellant-company filed writ petition before this Court.
4. Appellant’s claim and relief sought in the writ petition were opposed by the State on the pleadings and the submissions that the appellant-company had submitted application dated 14.06.2017 before the DIG, Stamps for calculation and deposit of stamp duty on the basis of valuation of amalgamation order dated 05.01.2011 passed by the High Court of Himachal Pradesh. The competent authority assessed the amount of stamp duty payable in accordance with the provisions of the Stamp Act of 1998 by taking entire document, i.e., order sanctioning the scheme of amalgamation as a whole, which not only resulted in transfer of immovable properties, i.e., 14 parcels of land situated in the State of Rajasthan which were owned by Sunvision Engineering Company Private Limited but also taking into consideration the valuation of the shares, which were transferred as a consequence of order passed by the High Court of Himachal Pradesh. As the appellant had not paid any stamp duty in respect of the valuation of transferred shares to the State of Himachal Pradesh or to any other State, the appellant was liable to pay stamp duty on the valuation of the entire document.
An objection to the maintainability of the writ petition was also raised on the ground of existence of an efficacious alternative remedy by submitting that writ petition was liable to be dismissed as there existed an efficacious alternative statutory remedy of filing revision petition under Section 65 of the Stamp Act of 1998 before the Chief Controlling Revenue Authority and, therefore, without availing the efficacious alternative remedy, writ petition was not maintainable.
5. Though the learned Single Judge overruled the objection to the maintainability of the writ petition on the ground of existence of alternative remedy, on merits, it was held that under the provisions of the Stamp Act of 1998, order of amalgamation passed by the High Court of Himachal Pradesh, being an instrument as defined under Section 2(xix) of the Stamp Act of 1998, was liable to be charged with stamp duty in terms of Section 3(b) of the Stamp Act of 1998 even though the instrument is executed out of the State of Rajasthan as it relates to the properties situated in the State of Rajasthan. It was further held that provisions of the Stamp Act of 1998 not only apply in relation to properties situated in the State of Rajasthan, but it extends to the valuation of the instrument as a whole chargeable with duty. As such, the market value of the instrument is required to be assessed in terms of Section 2(xxiii) of the Stamp Act of 1998. Learned Single Judge, referring to provisions contained in Sections 20 and 21 of the Stamp Act of 1998, held that the instrument, which is chargeable in any part of India with duty under the Indian Stamp Act, 1899 also becomes chargeable with higher rate of duty in the State of Rajasthan and, therefore, the State of Rajasthan is entitled to claim not only stamp duty in respect of the valuation of the entire instrument but also at the rate prescribed under the Stamp Act of 1998. The argument that as the instrument has been registered in other State, therefore, duty cannot be charged by the authorities in the State of Rajasthan on the said instrument, was repelled.
6. Assailing the legality and validity of the impugned order passed by the learned Single Judge, learned Senior Advocate appearing on behalf of the appellant contended before us that the finding of the learned Single Judge that for the purpose of levy of stamp duty on the instrument, which has been executed out of the State of Rajasthan, provisions contained in the Stamp Act of 1998 required stamp duty to be paid in respect of the valuation of the entire instrument, is contrary to the provisions contained in Section 3 read with Section 21 of the Stamp Act of 1998. Elaborating his submission, learned Senior Advocate also argued that while recording a finding against the appellant, learned Single Judge has completely ignored the territorial nexus as provided under Section 1, sub-section (2); Section 3, sub-section (b); Section 21, subsection (1) and Section 21, sub-section (2) of the Stamp Act of 1998. According to him, the liability for payment of stamp duty, when the document is submitted in the State of Rajasthan would be confined only to the valuation of the immovable properties, namely, 14 parcels of land situated in the State of Rajasthan. The instrument having been executed outside the State, the appellant-company and the dissolved company namely Sunvision Engineering Company Private Limited both situated and having registered offices outside the State of Rajasthan and the transfer of shares taking place by virtue of the order passed by the High Court of Himachal Pradesh, valuation of shares transferred under the scheme of amalgamation could not be included for the purpose of levy of the stamp duty.
7. Further submission of learned Senior Advocate is that the learned Single Judge has erroneously assumed that the State of Himachal Pradesh has a law that charges stamp duty on amalgamation, whereas, no such law has been placed by the respondents before the Court. On such erroneous assumption, it is contended, the learned Single Judge has erroneously concluded that the State of Himachal Pradesh defaulted to recover stamp duty from the appellant-company and on that basis recorded perverse finding that the default committed by State of Himachal Pradesh can be rectified by the State of Rajasthan by recovering the stamp duty in respect of the instrument. He would further submit that in the absence of there being any local laws prevailing in the State of Himachal Pradesh levying stamp duty on the instrument, the appellant-company is not liable for payment of stamp duty on the valuation of shares transferred under the scheme of amalgamation, but under the statutory scheme of the Stamp Act of 1998, only the difference of duty, which pertains to the market value of the properties situated in the State of Rajasthan, is payable under the law. Learned Senior Advocate would further stressed on the submission that as the instrument is not chargeable in the State of Himachal Pradesh, Sections 20, 23, 90 and 91 of the Stamp Act of 1998 are inapplicable. Therefore, in the absence of territorial nexus, levy of stamp duty on the entire instrument, which includes the valuation of the transferred shares, is bad in law. Relying upon the judgments of the Hon’ble Supreme Court in the cases of Collector of Central Excise, Ahmedabad Vs. Orient Fabrics (P) Ltd., (2004) 1 SCC 597 and State of W.B. Vs. Kesoram Industries Ltd. & Others, (2004) 10 SCC 201, it has been contended that the power to tax cannot be inferred by implication and in order to levy stamp duty, there must be clear charging section empowering the State to levy stamp duty. In case an instrument is executed out of the State of Rajasthan, stamp duty is leviable only in respect of those properties, which are situated in the State of Rajasthan which alone bear territorial nexus, levy of stamp duty beyond the valuation of 14 parcels of land situated in the State of Rajasthan is not permissible under the Stamp Act of 1998.
8. Per contra, learned Additional Advocate General appearing on behalf of the respondents would submit that the learned Single Judge has rightly held that once the document is covered by the definition of instrument as defined under Section 2(xix) of the Stamp Act of 1998, the instrument having been submitted for mutation of records in respect of 14 parcels of land, is chargeable to stamp duty upon valuation of the entire document. He would further submit that the provisions relating to payment of difference of duty as contemplated under Section 21 of the Stamp Act of 1998 would be applicable only when the stamp duty has been paid in the State where the instrument was executed. However, as the present is not a case where the stamp duty was paid in the State of Himachal Pradesh or in any State, provisions of Section 21 of the Stamp Act of 1998 cannot be taken recourse to by the appellant to contend that the appellant is liable to pay stamp duty only on the basis of valuation of 14 parcels of land situated in the State of Rajasthan. Learned Additional Advocate General argued that as per Section 3 of the Stamp Act of 1998, not only the instruments executed in the State of Rajasthan but also the instruments executed out of the State of Rajasthan on or after the date of coming into force the Stamp Act of 1998 are chargeable with duty. As the instrument-in-question is not covered under any of the clauses of proviso to Section 3 of the Stamp Act of 1998, the same is chargeable to stamp duty and liability could not be disputed on the ground that the instrument is executed outside the State of Rajasthan. In support of his submissions, learned Additional Advocate General has placed reliance upon the judgments of the Hon’ble Supreme Court in the cases of Hindustan Lever & Another Vs. State of Maharashtra & Another (2004) 9 SCC 438 and New Central Jute Mills Co. Ltd. & Others Vs. State of West Bengal & Others AIR 1963 SC 1307.
9. We have heard learned counsel for the parties, bestowed our serious consideration to their submissions and perused the records.
10. Stamp duties on the instruments or transactions other than those mentioned in Entry 91 of List I-Union List are levied by the State as per Entry 63 of List II-State List of Seventh Schedule of the Constitution of India.
The provisions other than those relating to rates of stamp duty fall within the legislative power of both the Union and the States by virtue of Entry 44 of List III-Concurrent List of Seventh Schedule of the Constitution of India.
11. By way of adaptation of the Indian Stamp Act, 1899 (Act No. 2 of 1899), The Rajasthan Stamp Law (Adaptation) Act, 1952 (No. VII of 1952) was enacted in the State of Rajasthan, which provided for levy of stamp duty until it was repealed by the Rajasthan Stamp Act, 1998 (Act No. 14 of 1999). As the preamble of the Stamp Act of 1998 states, it is an Act to consolidate and amend the law relating to stamps in the State of Rajasthan.
Section 1, sub-section (2) of the Stamp Act of 1998 provides that it extends to whole of the State of Rajasthan. Section 3 of the Stamp Act of 1998 provides for chargeability of instrument with stamp duty as below:
“3. Instrument chargeable with duty – Subject to the provisions of this Act and the exemptions contained in the Schedule, the following instruments shall be chargeable with duty of the amount indicated in the Schedule as the proper duty therefor respectively, that is to say,-
(a) every instrument mentioned in that Schedule, which, not having been previously executed by any person, is executed in the State on or after the date of commencement of this Act;
(b) every instrument mentioned in that Schedule, which, not having been previously executed by any person, is executed out of the State on or after the said date, relates to any property situate, or to any matter or thing done or to be done in the State and is received in the State:
Provided that no duty shall be chargeable in respect of,-
(i) any instrument executed by or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument;
(ii) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act, 1958 (Act No. 44 of 1958), as amended by subsequent Acts.
[3-A, Certain instruments chargeable with surcharge.– [(1) All instruments chargeable with duty under section 3 read with Schedule to the Act, shall be chargeable with surcharge at such rate not exceeding 10 percent of the duty chargeable on such instruments under section 3 read with Schedule to the Act, as may be notified by the State Government, for the purpose of the development of basic infrastructure facilities such as rail or road transportation system, communication system, power distribution system, sewerage system, drainage system or any other such public utilities serving any area of the State and for financing Municipalities and Panchayati Raj Institutions.]]
(2) The surcharge chargeable under sub-section (1) shall be in addition to any duty chargeable under section 3.
(3) Except as otherwise provided in sub-section (1), provisions of this Act shall so far as may be apply in relation to the surcharge, chargeable under sub-section
(1) as they apply in relation to the duty chargeable under section 3.]
[(4) Save as provided in sub-section (3), the State Government may make rules for collection of surcharge leviable under this section and for regulating the duties and remuneration of the person through whom surcharge is collected.]
[3-B. Surcharge for conservation and propagation of cow and its progeny.- [(1) All instruments chargeable with duty under section 3 read with Schedule to the Act, shall be chargeable with surcharge at such rate not exceeding 10 percent of the duty chargeable on such instruments under section 3 read with Schedule to the Act, as may be notified by the State Government, for the purpose of conservation and propagation of cow and its progeny.]]
(2) The surcharge chargeable under sub-section (1) shall be in addition to any duty chargeable under section 3 and any surcharge chargeable under section 3-A.
(3) Except as otherwise provided in sub-section (1), provisions of this Act shall so far as may be apply in relation to the surcharge, chargeable under sub-section (1) as they apply in relation to the duty chargeable under section 3.
[(3A) Save as provided in sub-section (3), the State Government may make rules for collection of surcharge leviable under this section and for regulating the duties and remuneration of the person through whom surcharge is collected.]
(4) The surcharge collected under this section shall be earmarked and utilized for the purpose of conservation and propagation of cow and its progeny in the State.]”
12. The instruments as specified in Section 3(a) and 3(b) of the Stamp Act of 1998 are those which are chargeable with duty of the amount indicated in the Schedule appended to the Stamp Act of 1998.
For the purpose of the Act, “Instrument” has been defined as below:
“2. Definitions.- In this Act, unless there is something repugnant in the subject or context,
(xix) “instrument” includes every document by which any right or, liability is, or purports to be, created, transferred, limited, extended, extinguished, or recorded;
[Explanation.-The term “document” also includes any electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000.]”
Further, “conveyance” has been defined under Section 2(xi) of the Stamp Act of 1998 as below:
“2. Definitions.- In this Act, unless there is something repugnant in the subject or context,
(xi) “conveyance” includes,-
(i) a conveyance on sale,
(ii) every instrument,
(iii) every decree or final order of any civil court,
[(iv) every order made under sections 232, 233 or 234 of the Companies Act, 2013 (Central Act No. 18 of 2013) or section 44-A of the Banking Regulation Act, 1949 (Central Act No. 10 of 1949); and]
(v) sale of air rights,
(vi) sale/consent related to below surface rights, by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any other person, intervivos, and which is not otherwise specifically provided for by the Schedule;”
13. At Serial No. 21 of the Schedule appended to the Stamp Act of 1998, conveyance as defined under Section 2(xi) is chargeable with stamp duty as provided therein, which is extracted hereinbelow:
