Saurer Textile Solutions Pvt Ltd Vs State of Maharashtra (Bombay High Court)
The Bombay High Court, in the case of Saurer Textile Solutions Pvt Ltd vs State of Maharashtra, has ruled that the Maharashtra government’s action in levying stamp duty on delivery orders (DOs) falls within the state’s legislative competence. The Court bench, comprised of Justices G.S. Patel and Neela Gokhale, observed that the state has the authority to impose such duty.
Understanding Stamp Duty and Delivery Orders
Stamp duty is a tax levied by the government on certain documents. The Maharashtra Stamp Act, 1958, outlines the specific instruments subject to this tax. Delivery orders, which are documents authorizing the receipt of goods from a warehouse or other storage facility, were the subject of debate in this case.
Key Points of the Judgement
- The Court held that the levy of stamp duty on DOs is within the constitutional framework. The power to legislate on stamp duty falls under Lists II and III of the Seventh Schedule of the Indian Constitution, which deal with state legislative powers.
- The Court likely dismissed arguments that levying stamp duty on DOs might impinge on freedoms guaranteed under Article 19 (1) (a) of the Constitution, which protects freedom of speech and expression.
Significance of the Judgement
This judgement clarifies the Maharashtra government’s authority to levy stamp duty on DOs. It has implications for businesses operating in the state, as they need to factor in this cost when dealing with such documents.
RELEVANT EXTRACT OF THE JUDGMENT
In view of the foregoing discussion, we hold that the action of the State of Maharashtra in levying stamp duty on ‘DO’ as provided in Article 29 of Schedule I of the MSA is well within the legislative competence of the State and does not intrude upon the legislative domain of the Parliament as re-served in Entries 41 and 83 of List I of Schedule VII of the Constitution of India and is not ultra vires Article 246(1), 286(1)(b) and 286(2) of the Constitution of India.
42. The alternative prayer of the Petitioners to read down Article 29 of Schedule I of the Stamp Act of 1958 to not apply to a DO issued in respect of goods imported in Maharashtra is untenable. As held by the apex court in the matter of The Authorised officer, Central Bank of India vs Shanmugavelu,53 the rule of reading down is to be used for a limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute. It is to be used keeping in view the scheme of the statute and to fulfil its purpose. We have already held that the DO is not an extension of a BoL and both are mutually exclusive documents. Thus, there is no statutory conflict and the requirement of reading down the provision does not arise.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. These Petitions assail the imposition, levy and collection of Stamp Duty by the 1st Respondent-State of Maharashtra on Delivery Orders (DO) under Article 29 of the Maharashtra Stamp Act, 1958, (MSA) where the supply of goods takes place in the course of import of such goods into the territory of India as being ultra vires Articles 246(1), 286(1)(b) and 286(2), read with Entries 41 and 83 of List I of Schedule VII of the Constitution of India. The legislative competence of the State is questioned on the ground that the constitutional scheme confers exclusive legislative competence on the Union of India in respect of import and export across customs frontiers and the State has breached the said legislative field.
Background:
2. A short history of these proceedings is necessary for completeness. Initially, the challenge was to the levy of stamp duty on what is called a ‘Bill of Entry’ (BoE). Some Petitioners assailed the levy of stamp duty on a BoE, some on DOs and some on both. During the pendency of these Petitions, however, Dr Birendra Saraf, the learned Advocate General, informed us on behalf of the State that the Government is not levying stamp duty on the BoE but is doing so on a DO. Hence, by order dated 1st March 2023, we permitted an amendment to all Petitions to include a challenge to the levy of stamp on DOs. Petitions are duly amended. Since the State is not levying stamp duty on the BoE, the challenge before us now pertains only to the levy of stamp duty on DOs.
(i) The lead Petitioner, a company registered under the Companies Act, 1956, is engaged in the business of manufacturing, trading, service and distribution of textile machinery. The other Petitioners are also bodies corporate engaged in their respective and varied business activities, but all of them, during the course of their business, import goods from outside the territories of India and are required by the State to pay stamp duty on the DOs in order to receive delivery of the imported goods.
(ii) The 1st Respondent in all the Petitions is the State of Maharashtra through its Revenue Ministry and the other Respondents include the Inspector General of Registration and Controller of Stamps and the Chief Controlling Revenue Authority, Customs Authorities having jurisdiction over individual Petitioners in their respective customs areas and the Mumbai Port Authority-a body corporate registered under the Major Port Trusts Act, 1963 dealing with imports at the Mumbai Port. Some private Respondents are arrayed in few petitions, but no relief is sought against them, and none is granted hence their description is not detailed herein suffice the same appears in the array of parties in the cause title.
(iii) The process of supply of goods or services or both, in the course of import into or export out of, the territory of India passes through various stages. It usually commences with the foreign exporter/vendor/supplier engaging a shipper or a ship owner to be the carrier of goods to be exported. The carrier issues a document known as the ‘Bill of Lading’ (BoL) to the exporter that details the type, quantity and destination of the goods being carried. On arrival of the goods at the port of destination, the carrier files the Import General Manifest (IGM) before the customs authority on the basis of the Invoice and the BoL.
(iv) The containers are unloaded at the port and taken for customs clearance. Meanwhile, the Petitioners, i.e., the importers file a BoE with the customs authority, on the basis of which customs duty is computed. Once the customs duty is paid, the goods can be cleared out of the customs area, but not before the carrier issues a DO directing the custodian of the goods to deliver the same to the person named therein or his assign or holder thereof. The import-ers, i.e., the Petitioners in the present case are then required to pay stamp duty @ 0.10% of the total assessed value of the goods under the MSA. The Petitioners are not entitled to receive delivery of the goods till the requisite stamp duty is paid on the DO. It is this levy of stamp duty on the DO which is assailed in the present petitions.
(v) Admittedly, the immediate trigger to this challenge was a judgment delivered by the Gujarat High Court in various writ petitions filed before it challenging levy of stamp duty on a BoE submitted for clearing imported goods with the customs authorities treating the BoE as a DO. The question in those petitions was whether stamp duty was liable to be paid on a BoE and whether such BoE is a DO in respect of the goods imported. The learned Single Judge of that High Court by a common judgment of 24th February 2010 held that the BoE is only a document filed with the customs authorities to enable computation of customs duty and hence, not an instrument creating any right or liability and does not amount to a DO within the meaning of the Bombay Stamp Act, 1958. The High Court, thus, held that stamp duty cannot be levied on a BoE as firstly, it is not an instrument and secondly, it did not create any right or liability in any person in respect of the goods.
(vi) An appeal was carried to the Division Bench of the Gujarat High Court by the State of Gujarat. While upholding the decision of the learned Single Judge, the Division Bench, however, modified it to the limited extent of holding that it is not necessary that in all cases a DO requires instructions by the Bailor to the Bailee (meaning the carrier to the consignee) to deliver goods bailed to the person named in the DO. At times, a ‘Bill of Lading’ is also an order relating to delivery of goods as is evident from Regulation 16 of Gujarat Maritime Board (Lading and Wharf age) Regulations, 1956. Thus, the appeal of the State was rejected with the aforesaid limited modification. We are told that the State of Gujarat has carried a Special Leave Petition before the Supreme Court, against the judgment and Order of the Division Bench. Notice is issued on the SLP, and the petition is pending.
(vii) Encouraged by the decision of the Gujarat High Court, the Petitioners assail the levy of stamp duty on DOs in the State of Maharashtra on various grounds, one of them obviously alleging discrimination between importers in the State of Gujarat, who are exempted from payment of stamp duty and the Petitioners here, who bear the additional cost.
(viii) Needless to say, admittedly importers of Maharashtra have continued to pay stamp duty on the DOs since enactment of the MSA and only recently, apprised of the decision of the Gujarat High Court, some of them represented to the Respondents regarding the said discrimination and requested that they too be exempted from payment of stamp duty. Inaction by the State, however, compels the Petitioners to bear the injustice and discrimination of the arbitrary levy of stamp duty and thereby suffer financial loss. This impelled them to file the present Writ Peti-tions seeking reliefs as prayed.
3. There are as many as 132 Petitions and the collective challenge is identical. However, as an alter-native, the Petitioners urge a read down of Article 29 of Schedule I of the Stamp Act of 1958 to not apply to a DO issued in lieu of a BoL in respect of goods imported in Maharashtra. Some of the Peti-tioners also seek refund of amounts paid by them as stamp duty till date from the State along with interest thereon.
4. By order dated 24th April 2023, we decided to treat Writ Petition (L) No.35036 of 2022 (now numbered as Writ Petition No. 1494/2023) as the lead Petition in the entire group relating to this issue. By a separate order dated 1st March 2023, we also noted that having regard to the exigencies of time and the number of matters listed, it will not be possible to hear all the counsels for the Peti-tioners individually. The Petitioners thus, arranged to have one of them as lead counsel so as to avoid repetition of arguments. We did, however, permit a joint concise statement of written submissions to be tendered on behalf of all the Petitioners. Mr Seervai, learned Senior Advocate, appeared on behalf of the lead Petitioner in Writ Petition No. 1494 of 2023. Mr Vikram Nankani, learned Senior Advocate, Mr Nishit Dhruva, Mr JC Patel, Ms Ishista Pokale, Mr Damodar Vaidya, Mr Sandip Chillana, Mr Ashok Singh, Mr Santosh Mishra, Mr Raghavendra Mehrotra and Mr Pratyushprava Saha, learned Advocates appearing on behalf of the respective Petitioners adopted the arguments of Mr. Seervai with some additions.
5. Submissions on behalf of the Petitioners are summarized as under:
(i) It is contended that levy of stamp duty by the State Government on DOs issued in the course of imports is illegal and unconstitutional on the ground that under Article 246(1) read with Entry 41 and 83 of the List I of Schedule VII of the Constitution, the State Legislature lacks the legislative competence to levy such stamp duty on any document which is part of the course of import of such goods into the territory of India. The entire field of legislation in this regard is within the sole legislative competence of the Parliament.
(ii) According to the Petitioners, DOs are nothing but an adjunct/extension to the BoL, and hence, in essence, it is a levy of stamp duty on a BoL which does not fall within the purview of the definition of the term ‘instrument’ under the MSA.
(iii) It is further argued that it is the BoL and not a DO that transfers the title in the goods. The BoL constitutes evidence of receipt of goods by the carrier/shipper; it is a document of title to the goods; and it is evidence of the terms and conditions of the contract of carriage.
(iv) The BoL is expressly excluded from the definition of the term ‘instrument’ as defined in Section 2(l) of the MSA and hence, the State Government lacks the power to levy stamp duty on a BoL.
(v) A combined reading of Entry 63 of List II and Entry 91 of List
I of Schedule VII to the Constitution indicates that the State Legislature is not competent to prescribe the rate of stamp duty in respect of documents specified in Entry 91 of List I which includes a BoL.
(vi) The Petitioners contend that a DO itself only ‘certifies’ that there are no claims or dues regarding import dues, duties, freight, etc. In itself, it creates no rights. A DO is not an instrument under Section 2(l) of the MSA. It is issued by the carrier/shipper to the custodian in favour of the consignee (Petitioners herein) named in the BoL confirming that the dues/duties/freight are cleared. It does not confer, declare, record or state any right, title or interest in goods and hence, is not a negotiable instrument.
(vii) Mr Seervai along with other learned Counsel placed reliance on the decision of the Gujarat High Court which held BoE not chargeable to stamp duty. The BoE was held not to be a DO nor an ‘instrument’ as defined in Article 24 of the Gujarat Stamp Act, 1958 (“GSA”) and hence, not chargeable to stamp duty. Article 24 of the GSA is pani matenia to Article 29 of Schedule I of the MSA.
(viii) The DO does not carry any assessable value for the levy of stamp duty. It is the ‘Out of Charge Order’ and not the DO that vests a right to receive the imported goods.
(ix) A DO made by the carrier or the agent of the carrier is not a document of title under Article 29 of the MSA and hence, it is not an instrument. It does not satisfy the conditions enumerated in Article 29 of the MSA.
(x) It is submitted that when the goods are compulsorily unloaded for clearance in the customs area of the importing country, the custodian or the port is the ‘bailee’ and the consignee is the ‘bailor’ under Section 148 of the Indian Contract Act. Hence, the ‘bailee’- custodian is duty bound to return the goods to the ‘bailor’-consignee without any demand.
(xi) There is no mandate requiring a DO under the Major Port Trusts Act, 1963 or the Customs Act of 1962 or the Customs Cargo Handling Regulation of 2009 or any other law. The use of a DO is thus redundant and is required only for administrative convenience.
(xii) Section 2(25) of the Customs Act, 1962 defines ‘imported goods’ to mean goods which have not been cleared for home consumption. Under the Sale of Goods Act, 1930, goods are deemed to be in the ‘course of transit’ from the time they are delivered to the carrier, who, in turn, delivers them to the buyer. Hence, from the conjoint reading of these two pro-visions, goods are in the course of the import till they are delivered to the buyer.
(xiii) The nomenclature used to describe a document is not a decisive factor to determine the character of the document. Thus, the nomenclature of ‘Delivery Order’ as an entitlement to delivery is nothing but an endorsed BoL, which entitles the consignee to take delivery of the goods.
6. The Petitioners placed reliance on the following decisions of various courts to support their con-tentions:
1. C Govindarajulu Naidu & Co, v State of Madras & Anr1
2. State of AP v National Thermal Power Corpn Ltd & Ors2
3. United States v Hvoslef3
4. Fairbank v United States4
5. Brown & Ors v The State of Mary-land5
6. Anglo Chilean Nitrate Sales Crop. V Ala-bama6
7. Ashok Tanwar & Anr v State of HP & Ors7
8. Indian Tourist Development Corporation ltd v Assistant Commissioner of Commercial Taxes & Anr8
9. Kiran Spinning Mills v Collector of Cus-toms9
10. AV Fernandez v State of Kera-la‘°
11. State of Travancore-Cochin & Ors v Bombay Co Ltd Alleppey”
12. State of Travancore-Cochin & Ors v Shanmugha Vilas Cashewnut Factory, Quilon‘2
13. JV Gokal & Co Pvt Ltd v Assistant Collector of Sales-Tax (Inspection) & Ors‘3
14. The State of Bihar & Anr v Tata Engineering and Locomotive Co Ltd‘4
15. State of Kerala & Ors v Fr William Fernandez & Ors‘5
16. KV Muthu v Angamuthu Am-mal‘6
17. National Insurance Co Ltd & Anr v Kirpal Singh & connected Appeals‘7
18. Satya Deo alias Bhoorey v State of Uttar Pra-desh‘8
19. Tripta Kaushik v Sub Registrar VI-A, Delhi & Anr‘9
20. The Trustees of the Port of Madras v KPV Sheik Mohamed Rowther & Co & Ors2°
21. State of Gujarat & Ors v Reliance Industries Ltd21
22. State of Maharashtra & Ors v Messrs MS Builders (Private) Ltd & Anr22
23. The Pioneer Contain-er23
24. Morvi Mercantile Bank Ltd v Union of In-dia24
25. State (NCT Delhi) v Union of India & Anr25
26. Garden Silk Mills Ltd v Union of In-dia26
27. M/s Ramratna Wires Ltd v State of Guja-rat27
28. M/s Vedanta Ltd v State of Guja-rat28
29. M/s Mangalore Ref & Petrochemicals Ltd v Commissioner of Customs, Mangalore29
7. Submissions on behalf of the Respondent-State by the learned Advocate General, Dr Birendra Saraf are summarized as under:
(i) Dr Saraf outlined the distinct fields of legislation of the Union of India and the State Government as per List I and List II of the With Schedule to the Constitution of India and the relevant Entries. He contended that the scheme of the Constitution and the distribu-tion of the legislative power is that insofar as the inter-state sales and that in course of international trade of commerce is in the exclusive domain of the Union of India, while the power is vested in the State Legislature in respect of all other sales.
(ii) The marginal note to Article 286 of Constitution of India is “Restrictions as to imposition of tax on the sale or purchase of goods”. The very language of that Article clearly implies that the object is to place restrictions on the legislative power of the State with respect to imposition of taxes on sales and purchases of goods after the introduction of GST regime on the supply of goods.
(iii) List I contemplate a separate tax on sales and purchase of goods. List II acknowledges tax on sales and purchases being distinct and independent of stamp duty on ‘instrument’. Article 286 of the Constitution does not restrict the power of the State Government to impose taxes contemplated in List II and not covered in List I. Thus, he submits, the challenge to legislative competence of the State relying on Article 286 of the Constitution is completely misplaced and misconceived.
(iv) The MSA does not levy stamp duty on a transaction but always on an ‘instrument’. The mere fact of computation of stamp duty on the basis of value of property or otherwise does not make the tax on transaction.
(v) The definition of ‘instrument’ in Section 2(l) of the MSA is not exhaustive. Article 29 of Schedule I of the MSA defines ‘Delivery Order’ in respect of goods. It has been understood to be an ‘instrument’ since the enactment of the Act in 1958. All the importers have paid stamp duty on DO since 1958 and have understood the same to be as such. It is only upon the decision of Gujarat High Court in the case of Essar Steel Limited v. Superintendent of Stamps30 and Reliance Industries (supra) declaring that a BoE is not chargeable to stamp duty that the Petitioners have been motivated to assail the legitimate act of the State to levy stamp duty on a DO. Dr Saraf was at pains to point out that the challenge before the Gujarat High Court was limited to levy of stamp duty on a BoE which held that a BoE is a document filed with the Customs Authorities to facilitate computation of customs duty and is not an ‘instrument’ creating any right or liability amounting to a DO within the meaning of the MSA.
8. Dr Saraf placed reliance on the following decisions of various High Court and the Supreme Court:
1. State of Bombay & Ors v Hospital Mazdoor Sabha & Ors31
2. State of Maharashtra & Ors v Messrs MS Build-ers (Private) Ltd & Anr32
3. Ruby Sales & Services (P) Ltd & Anr v State of Maharashtra & Ors33
4. State of Uttarakhand & Ors v Harpal Singh Rawat34
5. K Sambasivaraju v MVSR Chandrayya Chetty & Ors35
6. Puroshottam H Judye & Ors v VB Potdar36
7. Shipping Corporation of India Ltd v CL Jain Woollen Mills & Ors37
8. State of Madras v Davar & Co Etc38
9. Bengal Immunity Co Ltd v State of Bihar & Ors39
10. Hindustan Lever & Anr v State of Maharashtra & Anr40
11. Greaves Cotton & Co Ltd & Anr v State of Maharashtra & Anr41
12. Essar Steel Ltd Anr v Superintendent of Stamps & Ors (Supra)
13. State of Gujarat & Ors v Reliance Industries Ltd (Supra)
14. JV Gokal & Co (Private) Ltd v Assistant Collec-tor of Sales-Tax (Inspection) & Ors (supra)
15. Triveni Shankar Saxena v State of UP & Ors42
16. PGF Ltd & Ors v Union of India & Anr43
17. Builders’ Association of India & Ors v Union of India & Ors44
18. The Commissioner of Sales Tax Maharashtra State v M/s Radhasons International45
19. S Rangarajan v P Jagjivan Ram & Ors46
Analysis:
9. Having heard the learned counsel representing both sides and upon perusal of the record, the fol-lowing question arises for our consideration:
(i) Whether the State of Maharashtra has the legislative competence to levy, impose and collect stamp duty on a Delivery Order, an ‘instrument’ defined in Section 2(l) of the Maharashtra Stamp Act, 1958, chargeable with duty as mentioned in Article 29 of the First Schedule in the Maharashtra Stamp Act, 1958?
10. For easy and immediate reference, the relevant provisions of the Constitution of India are ex-tracted as under:
“246. Subject-matter of laws made by Parliament and by the Legislatures of States.—
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the “Con-current List”).
(3) Subject to clauses (1) and (2), the Legislature of any State has ex-clusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”).
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included [in a State] notwithstanding that such matter is a matter enumerated in the State List.
286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorize the im-position of, a tax on the sale or purchase of goods where such sale or purchase takes place:
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.
(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).
11. The relevant provisions of the Maharashtra Stamp Act, 1958 read as under:
Article 29 of Schedule I
