Case Note & Summary
The case involves a dispute over stamp duty and penalty imposed on a Deed of Assent executed by the Trustees of H.C. Dhanda Trust. Late Shri Harish Chand Dhanda, a former minister, received land gifts and constructed Hotel Lantern. He executed a Will in 2002 creating a trust and appointing his son and others as trustees. After his death in 2003, the trustees executed a Deed of Assent on 21.04.2005 to transfer properties to the legatees. The Collector of Stamps issued a notice alleging deficient stamp duty, and after proceedings, classified the deed as a gift deed, demanding deficit duty of Rs.1,28,09,700/- and imposing a ten times penalty of Rs.12,80,97,000/-. The Board of Revenue upheld this order. The appellant filed a writ petition in the High Court of Madhya Pradesh, which was dismissed by a Single Judge on 30.03.2017. A subsequent writ appeal was dismissed as not maintainable by the Division Bench on 04.09.2017. The appellant then appealed to the Supreme Court. The Supreme Court limited the notice to the quantum of penalty. The appellant argued that the deed was not a gift but an assent under the Indian Succession Act, and the penalty was excessive and imposed without reasoning. The respondent State argued that the deed was a gift and the penalty was justified due to intentional evasion. The Supreme Court examined Section 40 of the Indian Stamp Act, 1899, which gives the Collector discretion to impose a penalty not exceeding ten times the deficient duty. The Court found that the Collector's order merely stated that the party had not mentioned the actual nature of the document with an intention to escape duty, without any further reasoning or justification for the maximum penalty. The Court held that discretion must be exercised judiciously and not arbitrarily. Considering the facts, the Court reduced the penalty from ten times to five times of the deficient duty, i.e., Rs.6,40,48,500/-. The Court directed the appellant to pay the deficit stamp duty of Rs.1,28,09,700/- and the reduced penalty within four weeks, failing which the original order would revive. The appeals were partly allowed.
Headnote
A) Stamp Duty - Penalty under Section 40 - Discretionary Power - Indian Stamp Act, 1899, Section 40(1)(b) - The Collector has discretion to impose penalty not exceeding ten times the deficient duty, but such discretion must be exercised judiciously and not arbitrarily. The order imposing maximum penalty without any reasoning or justification is unsustainable. (Paras 12-18)
B) Stamp Duty - Deed of Assent - Classification as Gift Deed - Indian Stamp Act, 1899, Section 40 - The Collector classified a Deed of Assent as a Gift Deed and imposed deficit stamp duty and ten times penalty. The Supreme Court did not disturb the classification but held that the penalty of ten times was excessive and reduced it to five times, considering the bona fides of the appellant. (Paras 13-18)
C) Stamp Duty - Penalty - Quantum - Indian Stamp Act, 1899, Section 40(1)(b) - The Supreme Court held that the Collector failed to provide any reason for imposing the maximum penalty of ten times. The Court reduced the penalty from ten times to five times of the deficient duty, directing the appellant to pay the reduced penalty within four weeks. (Paras 17-18)
Issue of Consideration
Whether the imposition of ten times penalty by the Collector of Stamps under Section 40 of the Indian Stamp Act, 1899 was validly imposed or not.
Final Decision
The Supreme Court partly allowed the appeals. The order of the Collector of Stamps imposing ten times penalty was modified. The penalty was reduced from ten times to five times of the deficient stamp duty, i.e., Rs.6,40,48,500/-. The appellant was directed to pay the deficit stamp duty of Rs.1,28,09,700/- and the reduced penalty within four weeks from the date of the judgment. In default, the original order of the Collector would revive. The judgment of the High Court was set aside to the extent of the penalty.
Law Points
- Indian Stamp Act
- 1899
- Section 40
- Penalty
- Discretion
- Deed of Assent
- Gift Deed
- Collector of Stamps
- Board of Revenue
- High Court of Madhya Pradesh
Case Details
Civil Appeal Nos. 3195-3196 of 2020 (Arising out of SLP(C) Nos. 10972-10973 of 2020)
Shri A.K. Chitale, learned senior counsel, for the appellant; Shri Tushar Mehta, learned Solicitor General, for the State
Trustees of H.C. Dhanda Trust
State of Madhya Pradesh & Ors.
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Nature of Litigation
Civil appeal against High Court judgment upholding imposition of deficit stamp duty and ten times penalty on a Deed of Assent treated as Gift Deed.
Remedy Sought
Appellant sought setting aside of the penalty and reduction of the same.
Filing Reason
Appellant challenged the order of Collector of Stamps imposing deficit stamp duty and ten times penalty, which was upheld by the Board of Revenue and the High Court.
Previous Decisions
Collector of Stamps order dated 22.09.2008 held Deed of Assent as gift deed, imposed deficit duty of Rs.1,28,09,700/- and ten times penalty of Rs.12,80,97,000/-. Board of Revenue order dated 25.10.2011 upheld the Collector's order. High Court of Madhya Pradesh Single Judge judgment dated 30.03.2017 dismissed writ petition. Division Bench judgment dated 04.09.2017 dismissed writ appeal as not maintainable.
Issues
Whether the imposition of ten times penalty by the Collector of Stamps under Section 40 of the Indian Stamp Act, 1899 was validly imposed or not.
Submissions/Arguments
Appellant: Deed of Assent is not a Gift Deed but referable to Sections 331 and 332 of Indian Succession Act, 1925. Penalty was wholly illegal; no dishonest conduct; no reason given for maximum penalty; discretion not exercised reasonably.
Respondent: Nature of document found to be gift; clear intention to evade stamp duty; Board of Revenue upheld penalty; imposition of ten times penalty was justified.
Ratio Decidendi
The Collector's discretion under Section 40(1)(b) of the Indian Stamp Act, 1899 to impose penalty not exceeding ten times must be exercised judiciously and not arbitrarily. The Collector failed to provide any reasoning for imposing the maximum penalty of ten times, making the order unsustainable. Considering the bona fides of the appellant, the penalty was reduced to five times of the deficient duty.
Judgment Excerpts
The amount of penalty thus can be an amount not exceeding ten times. The expression 'an amount not exceeding ten times' is preceded by expression 'if he thinks fit'. The statutory scheme, thus, vest the discretion to the Collector to impose the penalty amount not exceeding ten times. Whenever statute transfers discretion to an authority the discretion is to be exercised in furtherance of objects of the enactment. The discretion is to be exercised not on whims or fancies rather the discretion is to be exercised in a judicial manner.
The Collector of Stamps in his order while imposing ten times penalty has not given any reason as to why he thought it fit to impose ten times penalty. The only observation made by the Collector is that 'since the party has not mentioned the actual nature of the document with an intention to escape the duty, therefore, under Section 40 of the Indian Stamp Act, 1899, ten times penalty Rs.12,80,97,000/- is imposed.' The above is not a reason but a mere conclusion. The Collector has not adverted to any material or circumstance to justify imposition of maximum penalty of ten times.
Procedural History
Collector of Stamps issued notice for deficit stamp duty on Deed of Assent dated 21.04.2005. After hearing, Collector passed order on 22.09.2008 classifying deed as gift deed, imposing deficit duty of Rs.1,28,09,700/- and ten times penalty of Rs.12,80,97,000/-. Appellant filed Reference Application before Board of Revenue, which was dismissed on 25.10.2011. Appellant then filed Writ Petition No.8888 of 2011 in High Court of Madhya Pradesh, which was dismissed by Single Judge on 30.03.2017. Appellant filed SLP in Supreme Court, withdrawn on 04.05.2017 with liberty to file writ appeal. Writ Appeal No.255 of 2017 was dismissed by Division Bench on 04.09.2017 as not maintainable. Appellant then filed the present appeals in Supreme Court.
Acts & Sections
- Indian Stamp Act, 1899: Section 40, Section 40(1)(b)
- Indian Succession Act, 1925: Section 331, Section 332
