COLLECTOR v. BHARAT VIJAY MILLS COMPANY LIMITED — 1964 DIGILAW 27 (GUJ)

P. N. HAGWATI, J. M. SHELAT, J. ( 1 ) BY his letter dated May 31 1961 the Inspector General of Registration without framing any specific questions has made to us the present Reference. Though specific questions have not been raised the learned Government Pleader appearing for the Revenue has agreed that in substance the following would arise from this Reference. The question which can be culled out from the Reference is whether the Collector is entitled for the purpose of ascertaining the adequacy or otherwise of the amount of stamp duty paid on the deed of conveyance in question submitted for registration to go behind the consideration set out therein and ascertain the true amount or the value of consideration on which the stamp duty is payable. ( 2 ) THE Reference arises from the following facts:- By an agreement dated April 22 1959 made between Bharat Vijay Mills Ltd. of the one part and The Ahmedabad Manufacturing and Calico Printing Co. Ltd. of the other part the Bharat Vijay Mills Ltd. agreed to sell and The Ahmedabad Manufacturing and Calico Printing Co. Ltd. agreed to purchase lands buildings plants machinery furniture fixtures and accessories therein set out for the aggregate price of Rs. 11 50 0 Under clause 2 of the agreement it was agreed that out of this sum of Rs. 11 50 0 the purchaser company should pay Rs. 1 0 0 on the execution of the agreement and the remainder on the completion of the purchase. By clause 8 the parties agreed to apportion the sale price of Rs. 11 50 0 as follows :- rs. 5 0 as the value of the lands; rs. 1 0 0 as the value of the buildings; rs. 5 0 as the value of the furniture; rs. 90 0 as the value of the stores spares and accessories for the machinery in use; and rs. 9 50 0 as the value of the plant machinery fixtures fittings and accessories. Clause 9 of the agreement provided that for the purpose of stamp duty on the conveyance the sum of Rs. 1 50 0 should be taken to be the value of the lands buildings plants and machinery in the nature of immovable property and the balance of Rs. 10 0 0 for the value of the machinery furniture fixtures fittings and accessories as transferable by delivery of possession. 1 50 0 should be taken to be the value of the lands buildings plants and machinery in the nature of immovable property and the balance of Rs. 10 0 0 for the value of the machinery furniture fixtures fittings and accessories as transferable by delivery of possession. The result therefore was that out of Rs. 1 50 0 Rs. 1 5 0 were allocated for the lands and buildings and the balance of Rs. 45 0 was allocated for the machinery and plant in the nature of immovable property. The schedule to the agreement set out the various lands and structures standing thereupon as also the different machineries and plants and certain quotas and licences agreed to be assigned or transferred to the purchaser company. It appears that under the powers reserved under clause 10 of then agreement the purchaser company appointed the Kalol Mills Private Ltd. Kalol as their nominees and under the provisions of that clause called upon the vendor company to execute the deed of conveyance in favour of the said nominees. In pursuance of the said agreement by an indenture of conveyance dated May 25 1959 the vendor company in consideration of the said sum of Rs. 1 50 0 granted assigned and transferred unto the purchaser company the leasehold lands hereditaments and premises more particularly described in the first part of the first schedule thereto together with factories buildings bungalows residential blocks chawls and other structures and works constructed erected or standing on the lands plant machinery and installations in the nature of immovable property as also certain freehold lands more particularly described in the second part of the said schedule together with structures standing thereupon and plants machinery and installations in the nature of immovable properties. Though the deed of conveyance stated that the vendor company thereby conveyed assigned and transferred plant machinery and installations in the nature of immovable property the schedule attached to the said indenture of conveyance did not specify what were the plant machinery and installations regarded by the parties as in the nature of immovable properties. The deed of conveyance was thereafter submitted to the Sub-Registrar Kalol for registration who registered the same and thereafter sent it to the Photo Registry at Poona. The deed of conveyance was thereafter submitted to the Sub-Registrar Kalol for registration who registered the same and thereafter sent it to the Photo Registry at Poona. It was then that an objection appears to have been taken that the parties had not disclosed the true consideration and had instead placed a notional or fictional value of Rs. 1 50 0 in respect of the properties described above for the purposes of stamp duty and thereupon the Sub-Registrar at Kalol impounded the said indenture of conveyance and transmitted it to the Collector for adjudication. It would seem that the Collector thereafter directed the Mamlatdar to make a panchnama of the movable and immovable properties situate in the said mills and to ascertain the market value thereof. On the purchaser company protesting against the aforesaid action of the Collector and asking for hearing a date was fixed when the learned advocate for the purchaser company appeared before the Collector and objected to that officer determining the actual value of the properties sold under the said deed of conveyance. On behalf of the Stamp Department the learned Assistant government Pleader Mehsana appeared. It would appear from a reference made by the Collector to the Inspector General of Registration that the Collector was of the view that there was a breach of the provisions of sec. 27 of the Bombay Stamp Act1958 that the said deed of conveyance was in substance and truth the transfer of all properties which according to him were in the nature of immovable properties for a total consideration of Rs. 11 50 0 upon which the stamp duty chargeable would amount to Rs. 34 492 np. under article 25 of Schedule I to the said Act and that as the stamp duty of Rs. 4 493 np. only had been paid by the parties there was a deficit of Rs. 30 0 and that as the parties had deliberately given a notional value of the consideration the executing party was liable to penalty under the provisions of the Act. It is in these circumstances that the Inspector General of Registration has made this Reference to us. only had been paid by the parties there was a deficit of Rs. 30 0 and that as the parties had deliberately given a notional value of the consideration the executing party was liable to penalty under the provisions of the Act. It is in these circumstances that the Inspector General of Registration has made this Reference to us. ( 3 ) THE question that arises for our consideration is whether the Collector under the provisions of the Bombay Stamp Act has the authority to go behind the amount of consideration set out in the deed of conveyance submitted for registration and ascertain de hors that deed of conveyance the actual or the market value of the properties which were the subject matter of the said deed and whether on the basis of such actual or market value so ascertained by him impose upon the executing party the stamp duty held by him to be chargeable and also a penalty. The learned Government Pleader has supported before us the action taken by the Collector and relying upon the provisions of sec. 28 to which we shall presently come to has argued that it was the duty of the parties to the said deed of conveyance to set out. fully and truly the consideration and all other facts and circumstances affecting the chargeability of the said instrument with duty. The learned government Pleader submitted that it was obvious from the said agreement of sale as also the said indenture of conveyance that the parties instead ofsetting out the true consideration of the various properties transferred there under had allocated a fictional or nominal value to the several properties set out in the deed of conveyance with a view to avoid payment of the full stamp duty as specified in article 25 of Schedule I to the Act. He further submitted that in the circumstances the Collector was justified in taking the action which he took and was also entitled to have the actual value of the properties transferred taken and levy the stamp duty accordingly. Mr. He further submitted that in the circumstances the Collector was justified in taking the action which he took and was also entitled to have the actual value of the properties transferred taken and levy the stamp duty accordingly. Mr. Kolah who appears for the purchaser company has strenuously argued that under the scheme of the Stamp Act the Collector has not been empowered by any of the provisions in the Act to hold such an enquiry and to ascertain the true value of the consideration de hors the deed of conveyance and therefore the act of the Collector was without jurisdiction and invalid. ( 4 ) IN order to appreciate these rival contentions it will be necessary to examine some of the provisions of the Act. Section 2 (g) defines conveyance as including a conveyance on sale and every instrument by which property whether movable or immovable is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. Clause (h) of section 2 provides that the expression duly stampedas applied to an instrument means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with the law for the time being in force in the State. In order to appreciate the meaning of the expression proper amount used in clause (b) one has to have recourse to sec. 3 which lays down the liability of instruments to stamp duty. Section 3 provides inter alia as follows:- subject to the provisions of this Act and the exemptions contained in Schedule I the following instruments shall be chargeable with duty of the amount indicated in Schedule I as the proper duty therefore respectively that is to say- (a) Every instrument mentioned in Schedule 1 which not having been previously executed by any person is executed in the State on or after the date of commencement of this Act. Article 25 (b) of Schedule I which it is agreed between the parties is applicable in the present case provides that a conveyance so far as it relates to immovable properties situate within the cities and urban areas specified in sub-columns (1) (2) and (3) in the column opposite to it and the amount or value of the consideration for which exceeds Rs. 200/where the amount or value of the consideration for such conveyance as set forth therein exceeds Rs. 200/but does not exceed Rs. 300/shall be chargeable to duty at the rates mentioned opposite thereto. Then follows a graded scale of duty depending upon the amount or the value of the consideration for such conveyances as set forth therein. Sec. 28 provides that the consideration if any and all other facts and circumstances affecting the chargeability of any instrument with duty or the amount of the duty with which it is chargeable shall be fully and truly set forth therein. Sec. 33 empowers certain officers to impound any instrument which is chargeable with stamp duty if such a document is not duly stamped. Sub-section (2) thereof lays down that every such officer shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law for the time being in force in the State when such instrument was executed or first executed. Sec. 39 empowers the Collector to stamp the instruments impounded by him under the provisions of sec. 33 or the documents sent to him under sub-sec. (2) of sec. 37 and provides the procedure to be followed by him in such cases by laying down that if he is of opinion that such instrument is duly stamped or is not chargeable with duty he shall certify by endorsement thereon that it is duly stamped or that it is not so chargeable as the case may be. But if on the other hand he is of opinion that such instrument is chargeable with duty and is not duly stamped he shall require the payment of the proper duty or the amount required to make up the same together with certain penalty. It is clear that by using the expression proper duty in this section the Legislature meant in the case of a deed of conveyance like the one before us the duty chargeable in accordance with the provisions of article 25 of Schedule 1 that is to say on the amount or the consideration for such conveyance as set forth therein. Sec. 42 provides for prosecution for offences against stamp laws apart from the right to levy penalty and sec. Sec. 42 provides for prosecution for offences against stamp laws apart from the right to levy penalty and sec. 62 of the Act lays down penalty for the omission to comply with the provisions inter alia of sec. 28 provided that it is established that the breach of sec. 28 was committed with the intention to defraud the Government. This analysis of the various provisions of the Act would appear to show that the Collector can charge and levy stamp duty in the case of a deed of conveyance relating to immovable property upon the amount or the value of the consideration as set forth in the document submitted for registration. There does not appear to be any provision in the Stamp Act which empowers the Collector to hold an enquiry or direct a panchnama to be made either by him or by any of his subordinates for the purpose of ascertaining the actual or the market value of the properties conveyed and transferred by such a deed of conveyance de hors the deed of conveyance itself. It is possible that there might be cases where the parties to a document to avoid payment of proper duty and with the intention to defraud the Government of revenue might commit breach of the provisions of sec. 28 but for such a case the government appears to be amply protected under the very provisions of sec. 28 which imposes a duty upon the parties to such a document to set out the consideration meaning thereby the true consideration and all other facts and circumstances affecting the chargeability of the instrument with duty or the amount of the duty with which it is chargeable. Another safeguard that appears to have been provided for is to be found in sec. 34 where under the Legislature has provided that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having authority to receive evidence or shall be acted upon registered or authenticated by any such person or by any public officer unless such instrument is duly stamped. Besides these safeguards sec. 42 read with sec. 62 lays down liability of a penal character for such persons who commit breach of the provisions of sec. 28 if such breach is committed with intention to defraud the government of its revenue. Besides these safeguards sec. 42 read with sec. 62 lays down liability of a penal character for such persons who commit breach of the provisions of sec. 28 if such breach is committed with intention to defraud the government of its revenue. The several provisions which we have cited above thus clearly indicate that the Act does not provide any power for the Collector to institute an enquiry for the purpose of arriving at the actual or the market value of the properties in question except from the document itself or adjudicate thereafter the true duty payable by the parties on such document. The view which we are inclined to adopt is supported by the decisions of various High Courts to which our attention was drawn to. In the matter of Muhammad Mgzaffar Ali I. L. R. . 44 All. 339decided by a Full Bench of the High Court of Allahabad though the question there under concerned was relating to a deed of gift there are certain observations which are of considerable assistance. In that case one Muzaffar Ali executed a deed of gift on a plain paper in favour of one Hasan Khan. The property gifted was a grove but the value thereof was not given in the document. The document was produced by the done before the Tahsildar of Kaiserganj who impounded it and sent it to the Deputy Commissioner for action. The Deputy Commissioner had the value of the grove estimated by the Tahsildar. He thereafter submitted the case for the orders of the Board of Revenue as to whether the duty and penalty could be levied from the donor or from the done. The Chief Controlling Revenue Authority felt doubt as to whether the instrument was chargeable with stamp duty or not and thereupon made a reference to the High Court. The High Court in answering the questions referred to it observed that if in a deed of gift the value of the property dealt with was not set forth the deed would not require any stamp and further observed that it was not within the competence of the Collector to have the property valued in order to assess the duty payable The High Court also observed that if the value of the property was intentionally omitted with a view to defraud the revenue prosecution would lie under sec. 64 of the Indian Stamp Act 1899 The High Court held that the words as set forth in such instrument in the corresponding entry in that Act referred back to the word value and not to the word property and since there was no value set forth in the document in question though that might amount to a contravention of sec. 27 of the Indian Stamp Act which was equivalent to sec. 28 of the Bombay Act if it was further found that the omission to state the value of the property conveyed was done with the intention to defraud the government a prosecution would lie against the person who executed the instrument under sec. 64 of that Act. They held that for the purpose of stamp duty the value given in the instrument itself would have to be accepted but if there was an intentional under-valuation then a prosecution would protect the government against the attempted fraud. But there was no provision in the Stamp Act authorising the Collector to do what he did in that case namely to ascertain the value of the property with a view to causing the instrument to be stamped with reference to the value thus ascertained. Similarly in Niran Bakhsh and others v. Emperor A. I. R. 1945 Lah. 69 where the document in question was a mortgage deed the High Court held that even if a mortgage deed were to be silent regarding consideration or did not set forth the circumstances from which it could be gathered how much stamp duty was to be paid the Collector had no power to take any evidence to find out the consideration and the only thing left for him was to prosecute the executant under sec. 64 of the Central Stamp Act for not complying with the provisions of sec. 27 therein. 64 of the Central Stamp Act for not complying with the provisions of sec. 27 therein. A similar question also arose before the High Court of Madras in The Joint Secretary Board of Revenue Madras v. K. R. Venkatarama Ayyar A. I. R. 1950 0 Mad 738 and a Full Bench of that High Court agreeing with the view of the Allahabad High Court in the matter of Mahammad Muzaffar Ali (supra) observed that there was no machinery provided in the Stamp Act for ascertaining the true value of the property or consideration as the case may be and that it would clearly be impracticable to cast the burden on the Registrar in each case to ascertain what the true market value was. They also observed that if under the Act the stamp duty were payable only on market value to be ascertained then it would have to be definitely stated in the Act who was to ascertain the market value and what rights if any an aggrieved party had by way of appeal revision or the like. They then observed that even if the matter were resintegra they would have no hesitation in holding from an examination of the wording used in the various Articles of the Indian Stamp Act that the stamp fee there under had to be collected on the value shown in the document itself. At page 740 of the report they further said :- it seems to us that the principle underlying the provisions of the Stamp Act with regard to valuation and estimation of the duty payable is that the value of the property should be taken from the face of the document and that the revenue of the Government is protected by requiring the parties to make a true and full disclosure of all facts and circumstances having any bearing on the duty payable failing which they must suffer the consequences of their false or defective statements. In Sitaram Kamalia v. State of Bihar A. I. R. 1960 Pat. 210 which was a writ petition under Article 227 of the constitution a Division Bench of that High Court held that where a deed of settlement was impounded under sec. 33 and a proceeding under sec. In Sitaram Kamalia v. State of Bihar A. I. R. 1960 Pat. 210 which was a writ petition under Article 227 of the constitution a Division Bench of that High Court held that where a deed of settlement was impounded under sec. 33 and a proceeding under sec. 40 of the Stamp Act was started by the Collector the Collector had no power to embark upon an enquiry with regard to the market value of the properties and require the payment of further stamp duty by the petitioners in accordance with his finding as to valuation. After examining the provisions of Article 58 in the Central Stamp Act. they observed that the instrument of settlement was to be stamped with the same duty as a bondfor a sum equal to the amount or value of the property settled as set forth in such settlement and following the view of the Allahabad High Court they held that the words as set forth in such settlement referred back to the word 4 value and not to the words property settled and therefore if the Collector were to be of the opinion that the instrument of settlement was duly stamped with proper duty according to the valuation given by the petitioners in the deed of trust it was the duty of the Collector to give a certificate under clause (a) of sub-section (1) of section 40 and thereafter return the document to the impounding officer. A similar view is also to be found in In re C. R. M. M. L. A. Chettyar Firm A I R. 1935 Rangoon 243 There is therefore a consensus of opinion among the High Courts to the effect that the words where the amount or value of the consideration for such conveyance as set forth therein would mean that the stamp duty authorities have to accept the amount or the value of consideration set forth by the parties in the deed of conveyance. Unless if is found from the document itself that the amount or the value of the consideration was not the true consideration that passed between the parties the stamp duty payable thereupon would be upon the consideration set forth by the parties in the document itself. Unless if is found from the document itself that the amount or the value of the consideration was not the true consideration that passed between the parties the stamp duty payable thereupon would be upon the consideration set forth by the parties in the document itself. If the stamp duty as laid down in article 25 (b) of Schedule 1 has been paid by the parties such a document must be treated as one which is duly stamped within the meaning of sec. 2 (h) of the Act and the Collector would have no power or jurisdiction to enter upon an enquiry for the purpose of ascertaining the actual or the market value of the property in question and thereupon proceed to fix the stamp duty which according to him would be the proper duty chargeable. ( 5 ) IN this view we are of the opinion that the Collector was bound to accept the amount or the value of the consideration set forth in the deed of conveyance before us and he had no authority to institute any enquiry de hors the said document. There will be no order as to costs. .