Kerala High Court
Kerala Builders Forum vs State Of Kerala on 28 August, 2009
Bench: K.Balakrishnan Nair, C.T.Ravikumar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 17794 of 2007(R)
1. KERALA BUILDERS FORUM, 43,
... Petitioner
2. M/S. SKYLINE FOUNDATIONS AND STRUCTURALS
3. INFRA HOUSING PVT. LTD.,
4. ABAD BUILDERS PVT. LTD.,
5. RAMESH SIVARAMAKRISHNA, S/O. LATE
Vs
1. STATE OF KERALA, REPRESENTED BY
... Respondent
2. THE INSPECTOR GENERAL OF REGISTRATION,
3. THE DISTRICT REGISTRAR,
For Petitioner :SRI.P.R.VENKETESH
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice K.BALAKRISHNAN NAIR
The Hon'ble MR. Justice C.T.RAVIKUMAR
Dated :28/08/2009
O R D E R
K. BALAKRISHNAN NAIR & C.T. RAVIKUMAR, JJ.
------------------------------
W.P.(C) Nos.17794 of 2007, 19852/07,
19901/07 and 6975 of 2009.
------------------------------
Dated this, the 28th day of August, 2009
JUDGMENT
Balakrishnan Nair, J.
The main point that arises for decision in these cases is the constitutional validity of certain provisions of the Kerala Stamp Act, 1959, which were introduced by way of an amendment by the Finance Act, 2007(Act No.15 of 2007). W.P.(C) No.17794/07: This writ petition is treated as the main case for the purpose of referring to the pleadings and exhibits. The brief facts of the case are the following:
2. The first petitioner is a Society, registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. The petitioners 2 to 4 and other builders are its members. The fifth petitioner is a person, who entered into two agreement with the third petitioner, one WPC No.17794/07 etc.
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for the purchase of an undivided share of land owned by the said petitioner and the other for construction of a residential flat. The members of the first petitioner, including petitioners 2 to 4 are engaged in the business of development of properties and construction of apartments and other buildings.
3. The fifth petitioner entered into Ext.P1 agreement dated 13.1.2007 with the third petitioner, for the purchase of an undivided share of a land owned by the latter. Simultaneously, the fifth petitioner also entered into another agreement with the third petitioner, for the construction of a flat in the property owned by the latter. Ext.P2 dated 13.1.2007 is the agreement concerning construction of the residential flat. The petitioners submit that similar agreements have been entered into by petitioners 2 to 4 and other members of the first petitioner with several persons, for the sale of undivided share of land belonging to them and for construction of apartment blocks. The petitioners also submitted that in certain cases, the owners of land entered into agreements with the builders, for a joint WPC No.17794/07 etc.
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venture and in such cases, they jointly develop the land. The owners of land will execute a power of attorney in favour of the builders to develop the property. Ext.P3 dated 14.3.2005 is one such agreement entered into by the third petitioner with the owners of a land. Ext.P4 dated 11.5.2005 is the power of attorney executed by the owners of the said land in favour of the third petitioner.
4. The petitioners are aggrieved by the recent amendments brought to the Kerala Stamp Act, 1959 (hereinafter referred to as "the Act") by the Kerala Finance Act, 2007. A true copy of the amendment introduced as per Amendment Act No.15 of 2007 to the Kerala Stamp Act, 1959 (Act No.17 of 1959) is produced in the writ petition as Ext.P6.. Section 2 of Act 15 of 2007 deals with the amendment to the Act. The impugned amendments are those relating to Articles 5 (3), 21, 22 and 44(f) of the Schedule to the Act. The amendment introduced to Article 5 reads as follows:
WPC No.17794/07 etc.
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"5. Agreement or memorandum of an agreement.
xxx xxx xxx
xxx xxx xxx
(c) if relating to giving authority
or power to a promoter or The same duty as a conveyance
developer by whatsoever name (under 21 or 22 as the case may
called, for construction, be) on the value or the estimated
development or sale or transfer cost of proposed construction/
(in any manner whatsoever) of development of such property, as
any immovable property. the case may be."
Article 21, after the amendment reads as follows:
"21. Conveyance (as defined by Six rupees for every Rs.100 or section 2(d), other than a part thereof of the amount or value of the consideration for such conveyance specified in conveyance.
No.22, not being a provided that if the
conveyance relates to any transfer
transfer charged or of undivided share of any land and
exempted under No.55. refers to any agreement relating to the construction of any building or part of building, including flat or apartment or room etc., the value of such building or such part of the building shall also be included in such consideration, and the stamp duty if any paid in respect of such agreement shall be deducted from the stamp duty payable for the conveyance."
A proviso has been added to column (3) of Article 22. The said article, including the amendment, reads as follows:
WPC No.17794/07 etc.
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"22. Conveyance (as defined Eight rupees fifty paise for every by section 2(d), not Rs.100 or part thereof of the amount or value of the consideration for being a transfer such conveyance. charged or exempted provided that if the conveyance relates to any transfer of undivided under No.55 of share of any land and refers to any immovable property agreement relating to the situated within the construction of any building or part of building, including flat or Municipal Corporations apartment or room etc., the value of or Municipalities. such building or such part of the building shall also be included in such consideration, and the stamp duty if any paid in respect of such agreement shall be deducted from the stamp duty payable for the conveyance."
A new clause (f) has been added to Article 44 by the aforementioned Amending Act. The said Article 44 deals with power of attorney. The relevant portion, which was introduced as per the amendment to the said Article, reads as follows:
"44. Power of attorney (as defined by section 2(p), not being a proxy).
(f) when authorising a The same duty as a conveyance person other than his (No.21 or 22 as the case may father, mother, wife or be) for the amount of husband, son, daughter, consideration/estimate brother of sister to sell immovable property situated in Kerala.
WPC No.17794/07 etc.
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The petitioners attack the above amendments, contending that the State lacks legislative competence for enacting those amendments. They also submit that the amendments violate the fundamental rights of the petitioners, guaranteed under Articles 14 and 19(1)(g) of the Constitution of India. So, they prayed that the impugned amendments may be declared as ultra vires of the Constitution and, therefore, unenforceable. The State filed a counter affidavit, supporting the impugned amendments. The petitioners filed a reply affidavit dealing with the averments in the counter affidavit.
5. We heard learned Senior Counsel Sri.Aravind Dattar and also learned counsel M/s.P.R.Venkitesh and S.Ananthakrishnan for the petitioners. We also heard M/s. K.I.Mayankutty Mather and Millu Dandapani, learned counsel who appeared in the connected writ petitions. The learned Special Government Pleader, Sri.N.Manoj Kumar appeared for the State and supported the impugned amendments. The learned Senior Counsel took us through item WPC No.17794/07 etc.
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63 of List II and Item 44 of List III of the Seventh Schedule to the Constitution. Reference was also made to item 91 of List I of the Seventh Schedule to the Constitution. Stamp duty is a duty on an instrument executed. Article 5 of the Schedule read with Section 3 of the Act enables levy of stamp duty on an instrument of agreement. The word 'agreement' is not defined in the Stamp Act. So, the definition of 'agreement' under the Indian Contract Act can be followed. Article 5(c) in the Schedule to the Act enables the State to levy duty on execution of an agreement, giving authority for construction etc., at the same rate as could be levied on a conveyance under Articles 21 or 22 of the Schedule, on the value for the estimated cost of development of such property. "Conveyance" is defined in Section 2(d) of the Act, as follows:
"(d). 'conveyance' includes 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 the Schedule".
The learned Senior Counsel pointed out that, hitherto, the WPC No.17794/07 etc.
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stamp duty for an agreement was Rs.50/- and now, the stamp duty has been fixed at the same rate as that of a sale deed. The amount will be calculated with reference to the value of the proposed construction or development mentioned in the agreement. The measure of tax indicated is highly arbitrary and irrational, it is pointed out. As per the newly amended Article 21 of the Schedule to the Act, when an undivided share in a land is conveyed and the same refers to any agreement relating to construction of any building, flat, apartment, room, etc., the value of such building, flat, apartment, room etc. shall also be included in the consideration for conveyance. It is also provided that any stamp duty paid in respect of the agreement shall be deducted from the stamp duty payable for conveyance. Article 22 deals with conveyance in Municipalities and Municipal Corporations. The newly introduced proviso to Article 21 finds a place in Article 22 also. The learned Senior Counsel submitted that when an undivided share in a property is conveyed, the duty is computed with reference to the flat or apartment that may come up in that land. The learned Senior Counsel pointed WPC No.17794/07 etc.
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out that in many cases, the agreement mentioned in Article 5(c) need not consummate into a sale. Similarly, a construction need not necessarily take place, even if the undivided share is transferred, as contemplated in Articles 21 and 22. In that event, there is no provision for refund of the amount already collected as stamp duty. With the amendment to Article 44, if a power of attorney is executed in favour of a person, who is not a near relative mentioned therein, stamp duty at the rate applicable to conveyance under Article 21 or 22, as the case may be, shall be levied. Hitherto, the stamp duty for executing a power of attorney was only Rs.100/-. The above provisions are not meant to plug tax evasion, but are steps to spread the tax net wider. It is an attempt to levy stamp duty for something not covered by the competency of the State Legislature. Without amending the definition of conveyance, something not a conveyance is treated as a conveyance and duty is sought to be levied. Such an attempt is without authority. The learned Senior Counsel also submitted that any such attempt of the State will offend Articles 14 and 19(1)(g) of WPC No.17794/07 etc.
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the Constitution of India. In support of his submissions, the learned Senior Counsel relied on the following decisions, viz. Gannen Dunkerley and Co., v. State of Madras, (AIR 1954 Madras 1130); State of Madras v. Gannen Dunkerley and Co., AIR 1958 SC 560, Hindustan Lever v. State of Maharashtra, (2004) 9 SCC 438, M/s. Govind Saran Ganga Saran v. Commissioner of Sales Tax, AIR 1985 SC 1041, State of Rajasthan v. Rajasthan Chemists Association, (2006) 6 SCC 773, Chief Controlling Revenue Authority v. Sudarsanam Pictures, AIR 1968 Madras 319, Chief Controlling Revenue Authority v. Dr.K.Manjunatha Rai, AIR 1977 Madras 10. The above decisions are cited in support of the submission that, something which has nothing to do with conveyance, as defined under Section 2(d) of the Kerala Stamp Act, cannot be taxed treating the same as conveyance, by amending the Schedule to the Act, but without amending the substantive provision. The learned Senior Counsel also relied on the decision in India Cement Ltd. v. State of Tamil Nadu, AIR 1990 SC 85, K.Damodarasamy Naidu v. State of Tamil WPC No.17794/07 etc.
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Nadu, (2000) 1 SCC 521, Builders Association v. Union of India, AIR 1989 SC 1371. The learned counsel, Sri.Mayankutty Mather, who appeared in a connected writ petition, submitted that the impugned provisions are suffering from the vice of vagueness. There is no provision for adjustment of stamp duty already paid, if no construction or development takes place. Relying on Section 54 of the Transfer of Property Act, it is submitted that agreement for conveyance does not transfer any interest in the immovable property. The learned counsel also submitted that the builder or land owner is not the owner of the flat/apartment. A third party purchases an undivided share and the builder executes a works contract and a flat is constructed in the property owned by the third party. So, in that transaction, no sale of flat takes place between the builder and the owner of the undivided share, who purchased it from the land owner or from the builder. The learned counsel also submitted that if a fully constructed flat is sold by the builder, then stamp duty has to be paid for the land as well as the flat. In the case on hand, the learned counsel submitted WPC No.17794/07 etc.
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that the person who purchased the undivided share in the land engages the builder to construct a flat for him. It is a works contract. So, duty is tried to be levied on construction of the building by the builder in execution of a works contract. The State Legislature has no legislative competence to do that. The actions of the State, though legislative, are liable to be interfered with, as they offend the fundamental rights of the petitioners under Articles 14 and 19(1)(g) of the Constitution of India, it is submitted. The learned counsel also relied on the decision of the Apex Court in State of Rajasthan v. Basant Nahata, AIR 2005 SC 3401.
6. The learned Special Government Pleader for Taxes, on the other hand, submitted that the newly introduced amendment does not cover the case of a works contract. No contractor will be liable to pay duty on the instrument of works contract executed by him. So, the builders and developers mentioned in Article 5(c) of the Schedule to the Act are those persons who purchase land or enter into agreement with the WPC No.17794/07 etc.
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land owner, construct flats in the land and sell them to third parties along with the undivided share in the land. The amount is collected in instalments from the purchaser. Though it would appear that the person who purchased the undivided share is building the flat engaging the builder, in fact, it is the other way. The builder is building the flat and selling it to the buyer on payment of its value in instalments. Tax was being evaded, on the conveyance of such flats. To plug such evasion of tax, the amendments were introduced. If the State legislature has competence to levy duty on the instrument of conveyance, it has also the power to enact provisions to plug evasion of stamp duty. The learned Government Pleader undertook that, stamp duty will not be levied from the works contractors, who execute work contracts, but duty will be levied only from persons who enter into agreements in the nature of Exts.P1 to P3 and execute power of attorney in the nature of Ext.P4. A close scrutiny of Exts.P1 to P4 would show that the sale of property and sale of flat takes place, but duty is paid only for the conveyance of undivided share in the land. In view of the above WPC No.17794/07 etc.
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position, the attack against the impugned provisions is untenable, it is submitted. The learned Government Pleader relied on the decisions of the Apex Court in State of Maharashtra v. Bharat Shanti Lal Shah, (2008) 3 SCC 5, Govt. of A.P. v. P.Laxmi Devi, (2008) 4 SCC 720, Greater Bombay Co-op, Bank Ltd. v. United Yarn Tex (P) Ltd., (2007) 6 SCC 236, State of A.P. v. Mcdowell and Co., (1996) 3 SCC 709, Veena Hasmukh Jain v. State of Maharashtra, (1999) 5 SCC 725 and Fantasy Sales Corporation v. Sales Tax Inspector, 2007 (2) KLT 174, to support his contentions.
7. We considered the rival submissions made at the Bar and also went through the decisions cited by both sides. Before referring to the decisions, we may refer to the agreements produced in this case as Exts.P1 to P3 and the power of attorney produced as Ext.P4. Ext.P1 is an agreement executed between the fifth petitioner and the third petitioner for the purchase of 1238/270000 undivided share in 120.115 cents WPC No.17794/07 etc.
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of land in Re-survey No.457/1 of Kakkanad Vilage in Ernakulam District for a consideration of Rs.1,32,466/-. The said agreement would show that one of the conditions of sale is that the fifth petitioner should entrust the work of construction to the third petitioner. The said agreement would also show that the first party thereto (third petitioner herein) has an approved plan from the Trikkakara Panchayat for the construction of a multi storeyed building called Infra Vantage in the above-said property, consisting of two bed room and three bed room apartments with common areas, common facilities, common amenities etc. The proposal is to construct a huge apartment consisting of 16 floors including the ground floor. As mentioned earlier, the agreement for sale of the undivided share in the land is subject to the condition that the construction shall be entrusted to the third petitioner. In the said agreement, it is specifically stated that the 5th petitioner shall not demand registration of the sale deed for the undivided share before the payment of entire sale price and settlement of the cost and charges of the construction of the WPC No.17794/07 etc.
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apartment. Simultaneously, with the execution of Ext.P1, the fifth petitioner has executed Ext.P2 agreement, entrusting the construction to the third petitioner. The said agreement provides for construction of a two bed room flat with a built up area having 950 square feet. As per the agreement, the fifth petitioner undertook to pay the charges for construction in accordance with the payment schedule. If there is default, the third petitioner is entitled to collect the defaulted amount with 12% interest. Clause 10 and 11 of Ext.P2 reads as follows:
"10). The second party shall not do anything on the apartment which will affect the strength and support of the entire multi storeyed building or raise any construction or change the boundary peripheral area including elevation and exterior of the building either by addition or deletion than in a manner planned, built and handed over.
11). The Second Party shall not interfere with and shall not obstruct the common use of the stair cases and the common verandas, common places and the common facilities such as lifts, standby generator, septic tank, water WPC No.17794/07 etc.
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tank etc. and the Second Party shall not cause any nuisance, obstructions and problems to the other owners of apartments.".
Going by the above clauses, there is no reason for the third petitioner to include those conditions, if he is only a works contractor. Those conditions would show that the third petitioner is more than a works contractor. A close reading of Ext.P2 would show that the third petitioner is not at all a works contractor. Yet another relevant fact is that it was the third petitioner who obtained the building permit from Kakkanad Panchayat, under the Kerala Municipality Building Rules, 1999, which were extended by the Government to the said Panchayat's area also. So, it is the responsibility of the third petitioner under the said Rules to build the apartments in accordance with the conditions of the building permit and also in compliance with the relevant Rules. Therefore, the third petitioner is not a works contractor.
WPC No.17794/07 etc.
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8. Ext.P3 is the agreement entered into by the third petitioner with third parties, under which it gets possession of certain land for construction of residential flats. The third petitioner offered a portion of the built up area to the land owners. In consideration of that, they have handed over possession of the property and also executed Ext.P4 power of attorney in favour of the third petitioner, so that the said petitioner can do with respect to the property all that can be done by the owners. So, a close reading of Exts.P3 and P4 would show that the owners have transferred the property to the builder in consideration of giving them a portion of the built up area going to be constructed and on the strength of Ext.P4 power of attorney, the builder will sell the undivided share to third parties and also along with that sell the flats on completion of construction of them. Exts.P3 and P4, when taken together, are meant to evade stamp duty on conveyance of property, as in the case of Exts.P1 and P2. Thus, a reading of Exts.P1 to P4 would show that, they are used to evade stamp duty. In this context, we would refer to the decision of the Apex Court in WPC No.17794/07 etc.
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Hussainbai v. Alath Factory Thezhilali Union, (1978) 4 SCC
257. It was a case of a coir factory, where the management claimed that the workmen under them were workers of independent contractors, though raw materials were supplied by the management and the goods manufactured were taken by them. The management entered into agreements with the intermediate contractors, who in turn, engaged workmen under them. A dispute arose as to who was the real employer of the workmen. The Labour Court as well as this Court held in favour of the workmen. The matter was carried before the Supreme Court. The Honourable Supreme Court, in that context, observed as follows:
"The presence of intermediate contractors with whom alone the workmen have immediate or direct relationship ex-contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like may be resorted to when WPC No.17794/07 etc.
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labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43A of the Constitution. The court must be astute to avoid the mischief and achieve the purpose of the law and not be misled by the 'maya' of legal appearances.".
In this case also, if the veil is lifted, it is clear that the builder is building and selling flats to prospective buyers and the sale consideration is received in instalments. But, agreements are made to appear the transaction to be one of works contract. If it is a works contract and the owner is constructing a building in his property, no duty can be levied on the building constructed because no transfer takes place.
9 Even if there is some vagueness in the provisions, the same will not vitiate them, in view of the submission of the learned Government Pleader, which we have recorded, that the amended provisions will not be invoked to levy duty on works contract, but only on builders who make constructions executing agreements/documents in the nature of Exts.P1 to P4. The crudities or certain inequities in the legislation are not grounds WPC No.17794/07 etc.
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to interfere with the same. In this context, we may refer to the decision of the Apex Court in Veena Hasmukh Jain v. State of Maharashtra, (supra), wherein the validity of a provision in the Bombay Stamp Act, providing that agreement for sale of a flat plus delivery of possession will be deemed to be conveyance, was challenged. In the said decision, the Apex Court held as follows:
"The duty in respect of an agreement covered by Schedule I, Article 25, Explanation I of the Bombay Stamp Act, 1958 is leviable as if it is a conveyance. The conditions to be fulfilled are that if there is an agreement to sell immovable property and possession of such property is transferred to the purchaser before the execution or at the time of execution or subsequently without executing any conveyance in respect thereof, such an agreement to sell is deemed to be a 'conveyance'. In the event a conveyance is executed in pursuance of such agreement subsequently, the stamp duty already paid and recovered on the agreement of sale which is deemed to be a conveyance shall be adjusted towards the total duty leviable on the conveyance. It is open to the legislature to levy duty on different kinds of agreements at different rates. If the legislature thought that it would be appropriate to collect duty at the stage of the WPC No.17794/07 etc.
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agreement itself, if it fulfils certain conditions instead of postponing the collection of such duty till the completion of the transaction by execution of a conveyance deed inasmuch as all substantial conditions of a conveyance have already been fulfilled such as by passing of a consideration and delivery of possession of the property and what remained to be done is a mere formality of execution of a sale deed, it would be necessary to collect duty at the agreement stage itself though right, title and interest may not have passed as such. Still, by reason of the fact that under the terms of the agreement, there is an intention of sale and possession of the property has also been delivered, it is certainly open to the State to charge such instruments at a particular rate which is akin to a conveyance. Therefore, it cannot be said that levy of duty is not upon the instrument but on the transaction.
The object of the Explanation is clear that if an agreement is entered into and that agreement itself contemplates the delivery of possession of the property within the stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act.".
In the case on hand also, there is a specific stipulation in Ext.P2 that the third petitioner will complete the construction of the flat WPC No.17794/07 etc.
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by 31.12.2008 and handover possession within 90 days thereafter.
10. It is true, the legislation is causing some inconvenience to the first petitioner and its members and also the prospective buyers of flats from them, but the same is not a ground for annulling an enactment. An Act can be declared as unconstitutional, if only it violates any of the provisions of the Constitution, other than those concerning Directive Principles of State Policy. The grounds available for successfully challenging a legislation have been adumbrated by the Honourable Supreme Court in Government of Andra Pradesh v. P.Laxmi Bai (2008) 4 SCC 720. In paragraphs 37 to 68, the above point has been dealt with elaborately, with special reference to the classic essay of James Bradley Thayer and the observations of eminent judges of the U.S.Supreme Court. The Apex Court has specifically laid down how a statute governing taxation should be viewed, in contra distinction to a statute governing civil rights. The relevant portion of the judgment on the above point WPC No.17794/07 etc.
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reads as follows:
"72. As regards fiscal or tax measures greater latitude is given to such statutes than to other statutes. Thus in the Constitution Bench decision of this Court in R.K.Garg v. Union of India (1981) 4 SCC 675, this Court observed (SCC pp.690-91, para 8) "8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud, where Frankfurter, J. said in his inimitable style:
'In the utilities, tax and
economic regulation cases, there are
good reasons for judicial self
restraint, if not judicial deference to WPC No.17794/07 etc.
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legislative judgment. The legislature
after all has the affirmative
responsibility. The courts have only
the power to destroy, not to
reconstruct. When these are added to
the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability'.
The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; 'that exact wisdom and nice adaptation of remedy are not always possible' and that 'judgment is largely a prophecy based on meagre and uninterpreted experience. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts WPC No.17794/07 etc.
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cannot, as pointed out by the United States Supreme Court in Secy. of Agriculture v. Central Rig Refining Co., 94 L.Ed.381, be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex issues.".
73. All decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated, this inevitably entails special treatment for special situations. The State must therefore be left with wide latitude in devising ways and means of fiscal or regulatory WPC No.17794/07 etc.
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measures, and the court should not, unless compelled by the statute or by the Constitution, encroach into this field, or invalidate such law.".
Going by the principles laid down by the Apex Court in the above decision, which was also a decision concerning stamp duty, we have no doubt in our mind that the impugned provisions have to be upheld, as they were enacted to prevent evasion of tax.
11. Now, we will refer to the decisions cited by the learned counsel for the petitioners. Gannon Dunkerley & Co.'s case (supra), was a case where the works contract was assessed under the Sales Tax Act. The Madras High Court held that the power to tax on sale of goods will not enable the State to tax the works contract. The said decision has been affirmed by the Apex court in State of Madras v. Gannon Dunkerley & Co., AIR 1958 SC 560. The said decision led to the amendment of the Constitution, as per which it was clarified that tax on sale or purchase of goods would include tax on WPC No.17794/07 etc.
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works contract also. Clause 29A was added to Article 366 of the Constitution of India by the said amendment. In Hindustan Lever v. State of Maharashtra, (2004) 9 SCC 431, the validity of the definition of "Conveyance", which included orders made by the High Court under Section 359 of the Companies Act in respect of amalgamation, reconstruction of companies etc. had come up consideration. The validity of the said definition was upheld by the Apex court in the said decision. Relying on the said decision, it was contended that unless the definition of Conveyance in Section 2(d) of the Kerala Stamp Act is amended, there cannot be any levy and collection of stamp duty for instruments not covered by the definition of Conveyance. Reference was made to the decision of the Apex Court in State of Rajasthan v. Rajasthan Chemists Association, (supra), to contend that duty can be levied only for conveyance and not on something treating the same as conveyance. In the said decision, the Apex Court held that sales tax can be levied only on actual price of goods sold and not based on the maximum retail price printed on the goods. WPC No.17794/07 etc.
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We feel that the above decisions cited by the learned counsel for the petitioners cannot be relied on, to impugn a tax evasion measure. We are not referring to other decisions cited by the petitioners, as we feel that they are not strictly relevant.
12. In this context, we refer to the decision of the Apex Court in State of West Bengal v. E.I.T.A. India Limited, (2005) 3 SCC 239. In the said decision, the Honourable Supreme Court upheld the validity of the provisions in the West Bengal Sales Tax Act, which provided for payment of tax in advance by casual traders even before the taxable event, the sale, took place. Following the above decision, this Court upheld the provisions for collection of advance tax under Section 47(16-A) of Kerala Value Added Tax Act. (See, Fancy Sales Corporation v. Sales Tax Inspector, 2007(2) KLT
174). The said decision of the Single Bench has been upheld by the Division Bench also. So, even before the taxable event takes place, tax can be levied, if it is made to prevent evasion of tax. The said decision will squarely apply to the facts of this WPC No.17794/07 etc.
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case also.
13. In view of the above legal position, the contention that the impugned provisions offend Articles 14 and 19(1)(g) of the Constitution of India, cannot be accepted. There is no discrimination pointed out in the impugned provisions, to attract Article 14 of the Constitution. A legislation cannot be invalidated by simply saying that its provisions are arbitrary, unless the challenge is referable to specific violation of any constitutional provision. The payment or the liability to pay stamp duty will not, in any way, affect the rights of the first petitioner or its members to carry on the business of development of lands or building flats. If, pursuant to the agreement covered by Article 5(a), no construction takes place, the person concerned can move the State for refund of the stamp duty and if it is not paid, he can move this Court for a Mandamus, to repay it.
14. In the result, the writ petition fails and it is dismissed.
WPC No.17794/07 etc.
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W.P.(C) Nos. 19852/07, 19901/07 and 6975 of 2009:
In view of the judgment in W.P.(C) No.17794 of 2007, these writ petitions are dismissed.
Sd/-
K. Balakrishnan Nair, Judge.
Sd/-
C.T. Ravikumar, Judge.
DK.