WP/26915/2005 of Sandvik Smith Asia Limited, Vs Chief Controlling Revenue Authority, on 31 December 2007

Order:

The petitioner, a company registered under the Companies Act, 1956, filed this writ petition seeking the following reliefs:

“ a) to issue a Writ of Certiorari or any otherappropriate Writ, order or direction to call for therecords relating to the orders of the 2[nd]respondent in Order No.G1/772/2005 dated 15-3-2005 and the order dated 9/8/2005 passed by the 1[st] respondent and to go into the legality andpropriety thereof and to quash and or set aside thesame.

b) to issue a Writ of Mandamus or any other appropriate Writ, order or direction to direct:appropriate Writ, order or direction to direct:

i)the 1[st] respondent to state the caseand refer the questions to this Hon’bleCourt for determining the same.and refer the questions to this Hon’bleCourt for determining the same.

ii)the 2[nd] respondent to levy the stampduty only on the value of the immovableproperty transferred as determined fromthe Basic Value Register insofar as theland and structures are concerned andon the basis of the book value inrespect of the machinery is concerned.”duty only on the value of the immovableproperty transferred as determined fromthe Basic Value Register insofar as theland and structures are concerned andon the basis of the book value inrespect of the machinery is concerned.”

2. Facts of the case, in brief, are as follows:

The petitioner, a group company, entered into BusinessPurchase Agreement dated 20-02-2004 with another company byname Kennametal Widia India Limited, whereunder the mining andconstruction division of the said company, situated at Patancheru,Medak District, was agreed to be purchased as an on-going concernfor a lumpsum consideration of Rs.64,90,40,000/-. In terms of the saidagreement, the total consideration was to be paid in two instalments,i.e. Rs.55,63,20,000/- - which was paid by the petitioner to the vendorcompany at the time of handing over possession and the balanceconsideration of Rs.9,27,20,000/- was agreed to be paid at the time ofconveying marketable title of the said property. The said agreementwas presented for registration on 25-05-2004 before the thirdrespondent, Sub-Registrar, Sanga Reddy. For the purpose of stampduty payable under the provisions of the Indian Stamp Act, 1899 (forshort ‘the Act’) the petitioner has assessed the value of immovable property at Rs.3,51,14,884/-, which is shown in the split-up figures asunder:

Land : Rs.64,10,650/-

Permanent Buildings : Rs.2,60,04,695/-

Shed : Rs.6,20,873/-

Permanently Embedded

Plant and machinery : Rs.20,76,666/-

As the said agreement was coupled with delivery of possession, thepetitioner paid stamp duty at 6% on the immovable property andvalued the same for the purpose of stamp duty and paid stamp duty ofRs.21,06,900/- and registration fee of Rs.1,75,575/-. There was anobjection with regard to stamp duty paid by the petitioner, as the samewas not paid on the total value of Rs.64,90,40,000/-. The petitionerfiled an application on 09-06-2004 seeking opinion on thechargeability of the stamp duty as contemplated under Section 31 ofthe Act. The second respondent disposed of the said application byorder dated 15-03-2005 by recording his opinion to the effect that thestamp duty is to be levied as per Article-47 (Explanation-I) of theSchedule I-A of the Act at the rate of 6% on the total consideration ofRs.64,90,40,000/- shown in the Business Purchase Agreement dated20-02-2004. During the pendency of the proceedings before thesecond respondent, conveyance deed in respect of the said propertywas executed by the vendor in favour of the petitioner on 11-03-2005and it was also presented for registration on 21-03-2005 by tenderingthe balance stamp duty and registration fee of Rs.19,20,860/- andRs.1,83,080/- respectively, before the second respondent. However,as the said document was also not evidenced by stamp duty on thetotal value consideration shown in the deed, it was kept pending videdocument No.P19/05. After the order dated 15-03-2005 passed by the second respondent was served on the petitioner, petitioner filed anapplication on 26-05-2005 before the first respondent, ChiefControlling Revenue Authority, Registration and Stamps Departmentto refer the questions raised by him to this court for opinion. In hisapplication dated 26-05-2005, he sought reference of the followingaspects:

i)Whether in the case of the slump sale involvingimmovable property, movables (which aretransferred by mere delivery) and intangibleproperty like goodwill, the entire consideration isliable to stamp duty under Entry 47A of Schedule1A of the Stamp Act?

ii) Whether in a slump sale involving immovableproperty, movables and intangible property, thestamp duty under Entry 47a of Schedule 1A has tobe limited to the value of only the immovableproperty comprising of land, buildings standingthereon, sheds and plant and machineriespermanently embedded in the earth?

iii)

Whether in a slump sale involving immovableproperty, movables and intangible property whereno separate values are assigned to theimmovable property, the stamp duty under Entry47A of Schedule 1A, is payable on the basis ofvalue of the immovable property (i.e. land,buildings standing thereon and sheds) as per theBasic Value Register?

However, the Chief Controlling Revenue Authority, Registrationand Stamps Department, by the impugned order dated 04-08-2005(mentioned in the writ petition as 09-08-2005) rejected the saidapplication with the following endorsement:

“ With reference to the appeal cited, it is informedthat U/s 57 of I.S. Act the Chief Controlling Revenue Authority is not empowered to allow the appeal.

Hence the appeal preferred by you U/s 57 ishereby rejected and the concerned records are returnedherewith.”

In view of rejection of its request, for reference, the petitionerhas approached this court.

3. The case of the petitioner is that the lumpsum considerationarrived at for purchase is under a lumpsum sale as an on-going projectfor a lumpsum consideration of Rs.64,90,40,000/-. It is stated that theconsideration is not only for immovable property, i.e. land, buildings,embedded machinery etc., but also for movables, tangibles,intangibles etc. It is stated that the value was arrived at by strategicsynerging of all the ingredients of the business venture, and, in thatview of the matter, the stamp duty was payable only on the immovableproperties which are shown in the annexure. It is stated that in thecase of such purchase, where lumpsum consideration is arrived at,stamp duty is payable only on immovable properties, i.e. land,buildings, embedded machinery etc. and, hence, there is no reason orjustification on the part of the respondents in insisting payment ofstamp duty on the entire value shown in the Business PurchaseAgreement dated 20-02-2004. Precisely, the case of the petitioner is that as the valuewas arrived at for the unit under a lumpsum sale, even in the absenceof split-up figures, stamp duty has to be charged, confining only toimmovable properties mentioned in the agreement. It is the case of thepetitioner that though important questions arise for consideration forreference, however, the first respondent has not considered theapplication dated 20-05-2005 and simply rejected it by misconstruing itas an appeal filed against the opinion rendered by the second respondent, under Section 31 of the Act.

4. Respondent No.2 has filed counter affidavit, generally, denyingthe allegations of the petitioner. It is stated that the petitioner has filedan application under Section 31 of the Act for adjudication of documentand for an authoritative opinion regarding the chargeability of thestamp duty of the document, which is styled as “Business PurchaseAgreement” between Kennametal Widia India Limited (seller) andSandvik Smith Asia Ltd. (buyer) and after perusing the said agreementdated 20-02-2004, the second respondent has given an authoritativeopinion under Section 31 of the Act informing that the stamp duty ischargeable on the total purchase price of Rs.64,90,40,000/- throughwhich the agreement was made and accordingly the same wasinformed.

In the counter affidavit, it is further stated that the whole transaction hasto be treated as a single transaction for various items mentioned in theBusiness Purchase Agreement (with possession) and the stamp dutyhas to be levied as per Article 47-A Explanation-I of Schedule 1-A ofthe Act at 6% on the consideration of Rs.64,90,40,000/-. Withreference to the application filed before the first respondent, it is statedthat as there is no doubt as to the amount of duty to be charged, as itwas determined by the District Registrar and Collector, as such, thequestion of referring the case under Section 56 of the Act. It is statedthat as much as the petitioner himself has given the value of theproperty in the agreement dated 20-02-2004, in absence of any doubtwith regard to the chargeability of the stamp duty, reference, as soughtby the petitioner, need not be referred. It is stated that Article 47-AExplanation-I of Schedule 1-A of the Act clearly defines how the stampduty is to be collected on such sales. The stamp duty is to be collectedon the amount or the value of the consideration for such sale as set

forth in the instrument or the market value of the property which is thesubject matter of the sale whichever is higher. It is also stated in thecounter affidavit that the orders passed by the second respondentseeking opinion with regard to chargeability on the document underSection 31 of the Act is not an appealable order; hence prayed fordismissal of the writ petition.

5. Heard Sri E.P. Barucha, learned Senior Counsel, appearing forthe petitioner, on behalf of Sri S. Niranjan Reddy and also learnedGovernment Pleader for Revenue appearing for respondents.

6. Learned Senior Counsel appearing for the petitioner submits thatas much as the agreement entered into between the petitioner andKennametal Widia India Limited is a Business Purchase Agreement,as an ongoing project and the value of the immovable property, i.e.Land, Permanent Buildings, Shed and Permanently Embedded Plantand machinery is arrived at on a lumpsum basis, the stamp duty ispayable on the immovable properties which is clearly shown in theBusiness Purchase Agreement; however, respondents have notaccepted the stamp duty for the purpose of registering the document. He further submits that the questions involved with regard to paymentof stamp duty are substantial issues and in spite of bringing the sameto the notice of the Chief Controlling Revenue Authority, instead ofreferring such questions to this court, he has simply rejected theapplication by misconstruing the same as an appeal filed against theorders passed by the second respondent on the application filed underSection 31 of the Act. It is submitted that when it was brought to thenotice of the first respondent regarding the questions to be referred tothis court, a duty is cast on him to refer such questions to this court foropinion with regard to chargeability of the stamp duty on the said document; however he has refused to do so without assigning anyvalid reasons. Learned counsel for the petitioner, in support of hisarguments, has placed reliance on the judgments in Banarasi Dass Ahluwalia Vs. The Chief Controlling Revenue Authority, Delhi[[1]], The Chief Controlling Revenue Authority and another Vs. The Maharashtra Sugar Mills Ltd. - Respondents[[2]]a n d M/s.Sudarshan Talkies (Delhi) Pvt. Ltd. Vs. The Chief ControllingRevenue Authority, Delhi[[3]]

7. On the other hand, it is submitted by learned GovernmentPleader appearing on behalf of the respondents that in the instantcase, total value of the consideration is Rs.64,90,40,000/-; hence, thestamp duty levied, is in accordance with Article-47 (Explanation-I) ofthe Schedule I-A of the Act, as applicable in the State of Andhra Pradesh. It issubmitted that as the petitioner has not given any split-up figures withregard to immovable properties in the Business Purchase Agreement,the stamp duty is payable on the total sale consideration of Rs.64,90,40,000/-, shown in the document. It is also submitted thatwith regard to reference provided under Section 57 of the Act, it is notfor the petitioner to seek reference in the absence of any reference bythe District Registrar as contemplated under Section 56 of the Act. It isfurther submitted that as much as the District Registrar has alsorendered his opinion under Section 31 of the Act and it is not anappealable order before the Chief Controlling Revenue Authority, assuch, there is no illegality or irregularity in the order passed by thesecond respondent. Learned Government Pleader has placedreliance on the judgment of P. Balakrishnan Vs. The District Registrar[[4]]and another judgment of a learned single Judge of thiscourt in State Bank of Hyderabad Vs. Government of AndhraPradesh[[5]].

8. Before adverting to the various contentions of the learnedcounsel for the parties, it is appropriate to refer to certain relevantprovisions of the Act. Chapter-III of the Indian Stamp Act deals withadjudication as to stamps.

Section 31 of the Act reads as follows:

31. Adjudication as to proper stamp:- (1) When nayinstrument, whether executed or not and whetherpreviously stamped or not, is brought to the Collector,and the person bringing it applies to have the opinion ofthat officer as to the duty (if any) with which it ischargeable, and pays a fee of such amount notexceeding fifteen rupees and not less than five rupees asthe Collector may in each case direct, the Collector shalldetermine the duty (if any) with which, in his judgment,the instrument is chargeable.

(2) For this purpose the Collector may require to befurnished with an abstract of the instrument, and alsowith such affidavit or other evidence as he may deemnecessary to prove that all the facts and circumstancesaffecting the chargeability of the instrument with duty, orthe amount of the duty with which it is chargeable, arefully and truly set forth therein, and may refuse to proceedupon any such application until such abstract andevidence have been furnished accordingly.

9. Section 3 of the Act is a chargeable section under the Act. Itsays that all the documents are liable to duties under the Act. Article47-A and Schedule-I A provide stamp duty payable in case of sale as defined under Section 54 of the Transfer of Property Act, 1982 and asp e r Article-47 (Explanation-I) of the Schedule I-A of the Act, anagreement of sale followed by evidencing delivery of possession of theproperty agreed to be sold shall be chargeable as a “Sale” under thisArticle. As per the proviso to explanation, after entering intoagreement of sale, where subsequently a sale deed is executed inpursuance of an agreement of sale as aforesaid or in pursuance of anagreement referred to in Clause (b) of Article 6, the stamp duty, if any,already paid or recovered on the agreement of sale be adjustedtowards the total duty leviable on the sale deed.

10. Sections 56 and 57 of the Act read as follows:

56. Control of, and statement of case to, ChiefControlling Revenue Authority:- (1) The powersexercisable by a Collector under Chapter IV and ChapterV and under Clause (a) of the first proviso to Section 26shall in all cases be subject to the control of the ChiefControlling Revenue Authority.

(2) If any Collector, acting under Section 31, Section 40or Section 41 feels doubt as to the amount of duty withwhich any instrument is chargeable, he may draw up astatement of the case, and refer it, with his own opinionthereon, for the decision of the Chief ControllingRevenue Authority.

(3) Such authority shall consider the case and send acopy of its decision to the Collector, who shall proceed toassess and charge the duty (if any) in conformity withsuch decision.

57. Statement of case by Chief Controlling RevenueAuthority to High Court:- (1) The Chief ControllingRevenue Authority may state any case referred to itunder Section 56, sub-section (2) or otherwise coming toits notice, and refer such case, with its own opinionthereon,- (a) if it arises in a State, to the High Court for that State.

57(2). Every such case shall be decided by not less thanthree Judges of the High Court to which it is referred, andin case of difference, the opinion of the majority shallprevail.

11. From a perusal of the provisions referred above, it is clear thatSection 31 contemplates only adjudication as to proper duty when theopinion is sought. To have such an opinion, any person can applyeven before the execution or thereafter. But, however, the provisionsunder Section 56 and 57 are altogether different which providereference and revision. Under Section 56 of the Act, if the Collector,exercising powers under Sections 31, 40 or 41, feels doubt as to theamount of duty with which any instrument is chargeable, in such anevent, he can refer the matter for the decision of the chief controllingrevenue authority. Under Section 57 of the Act, the chief controllingrevenue authority, in a case which arises for reference under Section56(2) of the Act, or otherwise, coming to its notice, can refer the case tothis court to have an opinion in case of any doubt with regard tochargeability of the duty. In the instant case, at first instance, theapplication was filed before the District Registrar to have an opinion onthe stamp duty. The said authority, in its order dated 15-03-2005, byrecording a finding that there is no separate value for the immovableproperties which are subject matter of the business purchaseagreement, has opined that the stamp duty is to be levied underArticle-47 (Explanation-I) of the Schedule I-A of the Act at 6% on thetotal consideration shown, i.e. Rs.64,90,40,000/-. But, however,subsequently, by application dated 20-05-2005, the petitioner soughtreference under Section 57 of the Act on the questions, namely:

iv)Whether in the case of the slump sale involvingimmovable property, movables (which aretransferred by mere delivery) and intangibleproperty like goodwill, the entire consideration isliable to stamp duty under Entry 47A of Schedule1A of the Stamp Act?

v) Whether in a slump sale involving immovable property, movables and intangible property, thestamp duty under Entry 47a of Schedule 1A has tobe limited to the value of only the immovableproperty comprising of land, buildings standingthereon, sheds and plant and machineriespermanently embedded in the earth?

vi)

Whether in a slump sale involving immovableproperty, movables and intangible property whereno separate values are assigned to theimmovable property, the stamp duty under Entry47A of Schedule 1A, is payable on the basis ofvalue of the immovable property (i.e. land,buildings standing thereon and sheds) as per theBasic Value Register?

12. On such application, further impugned order is passed by thechief controlling revenue authority rejecting the application, stating thatthe chief controlling revenue authority is not empowered to allow theappeal. The application filed is an independent application bringing tothe notice of the Chief Controlling authority on the questions raised inthe application for seeking reference to this Court. It was not anappeal filed as termed in the impugned order dated 04-08-2005.

13. Though it is submitted by learned Government Pleaderappearing for respondents that the reference which is provided underSections 56 and 57 of the Act is a discretion of the authority and there

is no obligation to refer the matter merely because reference is soughtfor, but, however, in the case of Banarasi Dass Ahluwalia (1 supra),the Hon’ble Supreme Court has held that under Section 57 of the Act,it is an imposed duty on the authority to state a case and refer thesame when it raises questions of law. It is held that Section 57 offers aremedy to the citizen to have his case referred to the High Courtagainst the order of chief controlling revenue authority imposing stampduty and/or penalty, provided the application involves substantialquestions of law. In the aforesaid judgment, it is held that when areference has been made to the authority or the case has otherwisecome to its notice, if an application is made under Section 57(1) of theAct and it involves substantial question of law, whether the case ispending or not, the authority is bound to state the case in compliancewith its obligation. So also in the case of The Chief ControllingRevenue Authority and another (2 supra), the Hon’ble Supreme Courthas held that the power contained in Section 57 is in the nature of anobligation, coupled with a duty and in given circumstances, it can bedemanded to be used also by the parties affected by the assessmentof the stamp duty. The same view is also taken in the further judgmentrelied on by the learned counsel for the petitioner, in the case of M/s.Sudarshan Talkies (3 supra). The learned Government Pleader hasplaced reliance in the case of P. Balakrishnan Vs. The DistrictRegistrar (4 supra). But, however, in the said case, there was adispute with regard to nature of the deed, so as to whether a deedpresented for, was a release deed or a deed for partition. In thatcontext, it was held that it need not be referred under Section 56(1) ofthe Act. But, however, in the case on hand, the respondent-authoritydid not consider the application filed by the petitioner on 20-05-2005 inproper perspective. When it is brought to the notice of the authority by

filing an application, a duty is caste on the said authority to examinethe same at least to the extent whether any questions will arise forconsideration for reference under Section 57 of the Act. The powerunder Section 57 of the Act is not confined to reference made by theauthority under Section 56 of the Act. But, a reading of the provisionunder Section 57 of the Act makes it clear that even when it is broughtto the notice of the chief controlling revenue authority by any affectedparty, the matter can be referred to this court. Though the applicationfiled by the petitioner dated 20-05-2005 is seeking reference on somequestions, but, however, the same is simply rejected, construing thesame as an appeal. The application dated 20-05-2005 is not anappeal against the opinion dated 15-03-2005. It is an independentapplication seeking reference. At the same time, it is to be furtherexamined, whether the petitioner is entitled to seek reference. Reference which is provided under Section 57 of the Act is notautomatic on mere application of the affected party. The matter can bereferred only in the event of arising of any substantial questions withregard to chargeability of the stamp duty under the provisions of theAct. Merely because a reference is sought, in all cases, it need not bereferred to by the chief controlling revenue authority. Whether anysubstantial questions for reference arise or not, will depend on theconstruction of a document, which is presented for the purpose ofstamp duty and registration.

14. Though it is submitted by learned counsel for the petitioner that itis a conjoint agreement and the consideration is arrived at on lumpsumbasis, but, however, there is no separate valuation adopted in thebusiness purchase agreement on the alleged immovable properties. In any event, this court need not record any finding on the said aspectas the chief controlling revenue authority has not gone into the said aspects. It is for the said authority to consider the same. Theargument of the learned Government Pleader appearing for therespondents that reference provided under Section 57 is at the solediscretion also cannot be accepted in view of the decisions relied onby the learned counsel for the petitioner referred supra.

15. As much as the chief controlling revenue authority has notconsidered the application of the petitioner dated 20-05-2005 and thesame was disposed of simply on the wrong premise that the same isan appeal filed by the petitioner against the order of the opinionpassed by the District Registrar under Section 31 of the Act, it isevidently a fit case for reconsideration by the chief controlling revenueauthority. Though the validity of the opinion dated 15-03-2005 is alsoquestioned in the writ petition, but, however, as the arguments of thelearned counsel for the petitioner were confined only to the validity ofthe order dated 04-08-2005, I set aside the order dated 04-08-2005and direct the first respondent to consider afresh the application dated20-05-2005 and pass appropriate orders. The first respondent shallconsider the application by examining whether any questions arise forreference as contemplated under Section 57 of the Act. It is madeclear that this court has not expressed any opinion on merits of theapplication and it is open for the first respondent-chief controllingrevenue authority to examine the same on its own merits, uninfluencedby any observations of this court in this order.

16. The writ petition is party allowed to the extent indicated above. No order as to costs.

__________________________

December 31, 2007MRR

[1]1968 (1) SCR 685 = AIR 1978 SC 4971968 (1) SCR 685 = AIR 1978 SC 497

[2]AIR 1950 SC 218AIR 1950 SC 218

[3]AIR 1978 DELHI 162AIR 1978 DELHI 162

[4]AIR 1989 MADRAS 257AIR 1989 MADRAS 257

[5]2005 (2) ALD 8012005 (2) ALD 801

JUSTICE R. SUBHASH REDDY.