Gujarat High Court
Rallies Industrial Chemicals Ltd vs State Of Gujarat & on 21 July, 1998
Author: Sonia Gokani
Bench: Sonia Gokani
RALLIES INDUSTRIAL CHEMICALS LTD.....Petitioner(s)V/SSTATE OF GUJARAT C/SCA/7800/1998 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 7800 of 1998 FOR APPROVAL AND SIGNATURE: HONOURABLE Ms. JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ RALLIES INDUSTRIAL CHEMICALS LTD.....Petitioner(s) Versus STATE OF GUJARAT & 3....Respondent(s) ================================================================ Appearance: MR MIHIR THAKORE, SR. ADV. with MR MR BHATT, SR. ADV. with MRS MAUNA M BHATT, ADVOCATE for the Petitioner(s) No. 1 MR J. A. GANDHI, ASST. GOVERNMENT PLEADER for the Respondent(s) No. 1 - 3 SINGHI & BUCH ASSO., ADVOCATE for the Respondent(s) No. 4 ================================================================ CORAM: HONOURABLE MS JUSTICE SONIA GOKANI 7th February 2013 ORAL JUDGMENT
This petition preferred under Article 226 of the Constitution of India challenges the order of the Superintendent of Stamps, Gujarat State seeking to quash and set aside the order dated 21.7.1998 and the notice issued on 29.10.1997. The facts lie in a very narrow compass, which require reproduction at the outset.
The petitioner is a company incorporated under the Indian Companies Act, 1913. Agreement was made on 22.2.1996 between Khatau Junker Limited ( KJL for short) and Rallis Industrial Chemicals Limited ( RIL for short), whereby KJL had agreed to sell, transfer and assign to RIL or its designated nominees, the leasehold land comprising in and devolved by the Gujarat Industrial Development Corporation including all machinery apparatus, plant, equipment, furniture, fixtures, fittings upon the said leasehold property relating to the business of the manufacturers. In other words, by virtue of the said agreement all immovable and movable assets were decided to be transferred for the consideration of aggregate sum of Rs.21 crores to be paid by the purchaser to the vendor as worked out in the agreement.
3. Pursuant to the said agreement on 30.8.1996, the purchaser RIL addressed a letter to the Director of KJL, inter alia, intimating that RICL, the petitioner herein is one of the designated nominees of RIL for purchase of leasehold property at Ankleshwar. It was further conveyed that movable plant and machineries of the vendors consisting of agro-chemical plants, cost of which was aggregating to Rs.16 crores, shall be purchased directly by the Industrial Credit & Investment Corporation of India (ICICI) as one of designated nominees of the purchaser and such amount would be made payable to the vendor directly by the ICICI.
4. The scenario, therefore, emerged was that by an invoice dated 27.9.1996 KJL sold the movable assets including the machinery, equipment and utilities consisting of Plant-1, Plant-2, Plant-3 and stores equipments, Lab Equipments and Safety Equipments to ICICI Bank for consideration of sum of Rs.17.12 crores, which included the sum of Rs.1.12 crores towards the Sales Tax. And, by a separate lease agreement entered into between the petitioner and ICICI Bank. ICICI Bank on dated 27th September 1996 gave on lease to the petitioner the aforementioned movable assets initially for non-cancellable period of 84 months at the lease rent set out in the agreement and on other conditions mentioned therein.
5. By a deed of assignment dated 8.10.1996, entered into between KJL and the petitioner herein as a designated nominee of Rallies India Limited (the original purchaser), the leasehold land was transferred and assigned to the petitioner herein known as Plot No.3000 in Ankleshwar notified area consisting of various revenue numbers (mentioned at paragraph 9 of the petition) within the village of Gadkhol taluka Ankleshwar, District: Bharuch ad-measuring 56166 sq.meters together with the factory and other buildings, structures and facilities constructed thereon in connection with the business of agro-chemicals carried on by KJL, for sum of Rs.4 cores on the terms set out in the deed of transfer and assignment.
6. It is averred by the petitioner that the requisite adhesive stamps worth Rs. 56 lakhs had been fixed on the deed of transfer and assignment dated 8.10.1996 and the same was presented for registration before the Sub-Registrar Office situated at Ankleshwar and the said deed was registered at sr. no. 1673 on 12th May 1997.
7. Notice dated 29.10.1997 was issued in exercise of powers under Section 68 of the Bombay Stamp Act, 1958 by the Collector and Additional Superintendent of Stamps to the petitioner inter alia mentioning that the document presented by the petitioner on 12.5.1997 before the Sub-Registrar, Ankleshwar indicated the sale consideration of Rs.21 crores whereas duty paid was only 56 lakhs on sale consideration. This being an act of evasion of stamp duty on the part of the petitioner, it was asked to show cause as to why requisite steps be not taken under the law against the petitioner-Company.
8. The authorized person of the petitioner-company appeared in person and gave a written reply on 15.12.1997 inter alia contending that the company has paid Rs.56 lakhs as stamp duty at the rate of 14% on Rs. 4 crores, being the value of leasehold property. And, it was further contended that the movable assets costing Rs.16 crores were taken on lease from ICICI for which lease deed was entered into on 27.9.1996, whereby the movable assets were leased to the company on which no stamp duty could be attracted. It was also urged that required stamp duty when already had been paid, the notice lacked any basis.
The petitioner when presented itself before the Collector and the Superintendent of Stamps while furnishing its reply, it also sought date upto 24.2.1998. However, on the next stipulated date, none remained present for and on behalf of the petitioner and the order impugned came to be passed directing the petitioner to pay the amount of Rs.3,67,64,510/- towards stamp duty and penalty of Rs. 60,00,000/= [rupees sixty lacs] within 30 days, failing which, provision of Section 46 of the Bombay Stamp Act was to be invoked whereby the petitioner would also become liable to pay interest at the rate of 24% on the said amount. Impugned order dated 21/07/1998 passed by the respondent no. 2 was received by the petitioner on 21st August 1998.
9.1 A notice came to be issued on 1st September 1998 calling upon the petitioner to make payment of the amount quantified in the order impugned.
Aggrieved by such act, present petition is preferred challenging the action of the respondent terming the same as absolutely illegal, arbitrary and contrary to the provisions of law, seeking following reliefs:-
{A} this Hon ble Court may be pleased to admit this petition;
{B} this Hon ble Court may be pleased to quash and set-aside the order at Annexure-H dated 21.7.1998 and the notice at annexure-I dated 1.9.1998, and be further pleased to hold and declare that the action of the respondent no. 2 in assuming that the consideration for the property transferred and conveyed under the document dated 8th October 1998 is Rs. 21 Crores is illegal, arbitrary and contrary to the provisions of the Bombay Stamp Act, 1958;
{C} this Hon ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction in the nature of mandamus, holding and declaring that the document at Annexure-F dated 8.10.1996 has been properly stamped and the requisite stamp duty has been duly paid by the petitioner;
{D} Pending hearing and final disposal of this petition, this Hon ble Court may be pleased to restrain the respondents nos. 1, 2 & 3 their agents, servants and subordinates from taking any action whatsoever against the petitioner in pursuance of the order at Annexure H dated 21.7.1998 and the notice at Annexure I dated 1.9.1998;
{E} Be pleased to grant such other and further reliefs as deemed proper in the nature and circumstances of the case;
{F} Be pleased to allow this petition with costs.
10. On issuance of the notice, the respondent State appeared and affidavit-in-reply came to be filed by the Additional Superintendent of Stamps inter alia contending that the intention of the parties as can be culled out from the agreement dated 22.2.1996 is to execute the conveyance in respect of the leasehold land and the movable assets both. It is urged that sum of Rs.16 crores for the transfer of movable assets is not included in the total sale consideration of Rs. 21 crores. It was nothing but a design on the part of the petitioner to evade the stamp duty, and therefore, the order of recovery of deficit stamp duty requires no interference.
11. Learned Senior Counsel Mr. Mihir Thakore appearing with learned senior counsel Mr. Manish Bhatt for the petitioner company have fervently made their submissions urging this Court that what is required to be looked at by the concerned authorities at the time of making scrutiny in respect of the stamp duty is the conveyance and not the transaction. It is further urged by the counsel that the act of the respondents is outrightly without any authority inasmuch as in the agreement itself it is amply made clear that the sale transaction and assignment by KJL would be to RIL or to any of its designated nominees. Both the petitioners and the ICICI Bank as per the communication addressed to the Director dated 30.8.1996 indicated that the petitioner and ICICI Bank were the nominees respectively for the purpose of movable properties and for sale and transfer of the leasehold property.
12. Learned counsels have relied on the decision of the Apex Court in the case of Hindustan Lever and another vs. State of Maharashtra and another reported in (2004) 9 SCC 438 wherein it is held that what is made liable to the stamp duty is the instrument and not the transaction of purchase and sale. Relevant findings require reproduction at this stage :
21.
In the case of the Commissioner of Inland Revenue v. G. Anous and Co. and others (1891) Vol XXIII Queen's Bench Division 579, considered as to what interpretation has to be placed upon the expression "conveyance on sale" with regard to S. 70 of the Stamp Act, 1899 and held :-
"The term conveyance on sale includes every instrument and every decree or order of any Court or of any Commissioners, whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser or any other person on his behalf or by his direction."
The Court held that the thing, which is made liable to stamp duty is the "instrument." It is not a transaction of purchase and sale, which is struck at, it is the "instrument" whereby the purchase and sale are affected which is struck as. It is the "instrument" whereby any property upon the sale thereof is legally or equitably transferred and the taxation is confined only to the instrument whereby the property is transferred. If a contract of purchase or sale or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case would not fall within the section and no tax can be imposed. Taxation is confined to the instrument by which the property is transferred legally and equitably transferred.
13. Queen s Bench Division in the case of The Commissioner of Inland Revenue vs. G.Angus & Co. The same vs. J.Lewis and Sons reported [1889] Volume XXIII page 579 was considering the question of ad valorem duty to be attached to the instrument in connection with an appeal brought by the Commissioner and it observed thus:-
Now, the first thing to be observed is, that when the legislature assume to impose a tax on the subject, they must do so in clear and distinct terms; if the matter remains in doubt, the subject is entitled to judgment. Subject to that observation, the question is, whether the instrument which was laid before the Commissioners was a conveyance on sale within the meaning of s.70 of the Stamp Act, 1870. That section says that one of the matters on which duty is imposed in the schedule to the Act, agreements being another), includes every instrument whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser. the first thing to be noticed is, that the thing which is made liable to the duty is an instrument . If a contract of purchase and sale, or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case is not within the section, and no tax is imposed. It is not the transaction of purchase and sale which is struck at; it is the instrument whereby the purchase and sale are effected which is struck at. And if anyone can carry through a purchase and sale without an instrument, then the legislature have not reached that transaction. The next thing is that it is not every instrument which may be brought into being in the course of a transaction of purchase and sale which is struck at. It is the instrument whereby any property upon the sale thereof is legally or equitably transferred. The taxation is confined to the instrument whereby the property is transferred. The transfer must be made by the instrument. If a transfer requires something more than an instrument to carry it through, then the transaction is not struck at, and the instrument is not struck at because the property is not transferred by it.
14. Bombay High Court in the case of Greaves Cotton & Co. Ltd. vs. State of Maharashtra reported in [2005] 57 SCL 19(BOM.) relying on the above referred judgments decided identical question of law by holding that the State could demand stamp duty on an instrument only and not on the transaction:-
14. Having considered all the submissions of the learned counsel for the petitioners as well as the learned counsel appearing for the respondents in both the above matters, the basic issue involved in the above petitions is that whether the respondent-State could demand stamp duty de hors an instrument and only out of a transaction. After having perused the relevant provisions of law as mentioned hereinabove, it is abundantly clear that the State of Maharashtra is entitled to levy stamp duty only on the instrument and not on the transaction. It is clear that there is no law which compels the petitioners to issue a Debenture Certificate before converting the same into an Equity Share. In fact, in that behalf, the very issue was argued before this Court in Om Prakash Berlia s case (supra) wherein this Court has clearly taken the view that there is no mandatory provision in the Companies Act mandating a company to issue a Debenture Certificate before conversion of the same into an Equity Share.
The other issue is whether the State is entitled to levy stamp duty on a transaction which is not executed into an instrument. The aforesaid provisions of the Bombay Stamp Act, 1958 as well as the old judgment of the English Court referred to hereinabove and the recent judgment of the Supreme Court in Hindustan Lever s case (supra) make it abundantly clear that the State is entitled to levy stamp duty only on an instrument and not on a transaction. In both the above cases, there is no instrument or a document which can be called as Fully Convertible Debenture Certificate or a Partly Convertible Debenture Certificate and in these circumstances, the demand made by the respondent-State for additional duty with regard to both the aforesaid petitions are totally unsustainable in law.
15. Counsel urged fervently that a separate invoice was created with the ICICI Bank and the entire machinery was transferred from KJL to ICICI, which (machinery) eventually was taken on lease by the petitioner herein. He urged that in no manner the movable assets which were transferred could have been taken note of by the authority while examining the instrument as the event of payment is on the instrument and not on the transaction.
15.1 It was further argued that quoting higher market value of the property by the respondents and thereby evaluating the market value of property to Rs.4,97,46,500/- is also in absolute breach of the provision of the law.
15.2 To substantiate such contention, counsel further urged that the said notice was completely silent on this aspect and, therefore, no order could have been passed beyond the bounds of the notice. He has relied on the decision of the Apex Court rendered in the case of Nasir Ahmad vs. Assistant Custodian General, Evacuee Property, U.P Lucknow and Anr., reported in (1980) 3 SCC 1, wherein the Apex Court has held as under :-
3.
The facts stated above clearly show that the notice and the declaration that followed are both invalid. The notice called upon the appellant and his brother to show cause why they should not be declared evacuees under cl. (iii) of Section 2 (d) of the Act and the ground mentioned in the notice was also based on that clause yet the Assistant Custodian found that they were evacuees under clauses (i) and (ii) as well. The Authorised Deputy Custodian held that the ground given in the notice in support of the case based on cl. (iii) was vague and the notice was defective so far as that ground was concerned, but that was the only case the appellant was called upon to answer. The foundation of a proceeding under Section 7 is a valid notice and an inquiry which travels beyond the bounds of the notice is impermissible and without jurisdiction to that extent. Therefore the declaration that the appellant was an evacuee under clauses (i) and (ii) of Section 2 (d) of the Act must be held invalid.
15.3 Learned counsels urged that if at all such imposition was to be made, the authority was bound to provide requisite documents to the petitioner and on its failing to so do it, entire order requires quashment. He relied on the decision of this Court in the case of Manubhai Vaghjibhai Dabhi vs. State of Gujarat and others reported in 2006(3) GLR 2177. This Court in this decision quashed the order of the authority, which had taken note of the higher market value on the basis of the Jantri, however, the copy of such Jantri was not supplied to the petitioner. Thus, on the ground that the document relied on for determining the market value since was not furnished to the party, the Court quashed the order.
15.4 It is urged that mere reference of earlier agreement would not amount to incorporation of the terms and conditions of earlier transaction, however, for culling the intention of the parties, this may be vital.
15.5 It is therefore, requested that on none of the grounds, the order impugned can be sustained. Learned counsels have taken this Court through the provisions of Bombay Stamp Act, particularly, to drive home the point that action of the respondent authorities, in no manner, is sustainable under the law.
16. Per contra, learned AGP Mr. Jaimin Gandhi contended fervently that there is an alternative remedy available under the Bombay Stamp Act, and therefore, this petition does not lie. He has strongly relied upon the definition of Section 2(l), which defines Instrument and 2(g) defining conveyance under the Bombay Stamp Act. He also contended further that explanation added to the definition of Immovable Property is a clear indication that the petitioner could not have excluded movable property from the said transaction.
16.1 He urged the Court that Article 20(a) shall have to be regarded in the case of the present petitioner. According to learned AGP, the amount specified in the agreement entered into by and between the parties if is looked at, it was a transaction worth Rs.21 crores and, therefore any attempt on the part of the petitioner to circumvent the law by separately preparing an invoice with the ICICI Bank cannot take away the right of the authority to look into the real intent of the parties. He also further urged that principal agreement executed by and between the parties required to be taken into account and though it is nomenclatured as lease, it is essentially a sale. He also has further urged that in the reply the petitioner has mentioned that the lease deed entered into on 27.9.1996 speaks of lease of movable assets to the company.
16.2 Learned AGP, however, has not disputed the fact that no copies of Jantri or the report of the competent authority on immovable properties has been furnished to the petitioner as the only addition in value of the property, according to the learned Assistant Government Pleader, is from 4 crores to 4.97 crores. He urged that only for the purpose of 97 lakhs, the petitioner can be given the opportunity to hearing if the Court deems it fit. However, he contended that for rest of the amount, no interference is desirable.
16.3 Learned counsel Mr. Thakore in rejoinder has urged however that the order impugned since is passed without availing copy of report and without affording opportunity of hearing, to that limited extent, the Court may direct the respondent to fulfill the mandate of law.
17. Upon thus hearing both the sides and on careful examination of the material on record, at the outset, first and foremost is the plea of maintainability and it is to be held that even when alternative remedy is provided under the statute there can be no bar to entertainment of writ petition under Article 226 of the Constitution and this being a very well-settled position of law, such contention requires no further elaboration.
18. With this, the law on the subject needs to be dealt with. Some of the relevant provisions of the Bombay Stamp Act,1958 {now Gujarat Stamp Act, 1958} [ the Act hereinafter] would be necessary to be reproduced.
18.1 Section 2 (g) defines Conveyance as under :-
(g) conveyance includes.-
(i) a conveyance on sale,
(ii) every instrument,
(iii) every decree or final order of any civil court;
(iv) every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of reconstruction or amalgamation of companies, or deemed to have been registered under the Gujarat Co-operative Societies Act, 1961 or a corporation or an association formed and registered under the Bombay Non-Trading Corporation, 1959 or the Gujarat Ownership Flat Act, 1973, as the case may be, by which property, whether movable or immovable, or any estate or interest in any property, is transferred to, or vested in, any other person, interest in any property, is transferred to, or vested in, any other person, inter-vivos, and which is not otherwise specifically, provided for any Schedule-I;
Explanation I For the purpose of this clause, an instrument whereby a co-owner of any property transfers his interest to another co-owner or the property and which is not an instrument of partition shall be deemed to be an instrument by which property is transferred inter-vivos;
18.2 Section 2(ja), defines Immovable Property as under:-
immovable property includes land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.
18.3 It is to be noted that explanation has been inserted to the clause (ja) to Section 2 in the year 2007 by an Amendment (Gujarat 11 of 2007), which reads as under:-
Explanation-
Where any plant and machinery of a factory transferred or sold with the intention of running the said factory, such transaction shall be deemed to be a transaction of the immovable property.
18.4 Section 2(c) speaks of Instrument . Explanation in clause (l) is inserted again by Gujarat 11 of 2007, which is as under:-
instrument includes every documents by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt:
Explanation.-
The term document also includes any electronic record as defined in clause (t) of sub-section(1) of section 2 of the Information Technology Act, 2000.
19. Movable property under section 2(pa) is inserted by the Act of Gujarat 13 of 1994 as under:-
Movable property includes standing timber, growing crops and grass, fruits upon and juice in trees and property of every other description, except immovable property, by which any right or liability is or is purported to be created, transferred, limited, extended, extinguished or recorded.
20. Section 2 specifies that the instrument shall be chargeable with duty of the amount indicated in Schedule-I as the proper duty.
21. Section 4 states that where several instruments are used in single transaction of sale, mortgage or settlement, the principle instrument shall be chargeable with the duty prescribed in Schedule-I for the conveyance, mortgage or settlement and each of the other instrument shall be chargeable with the duty of Rs.100 instead of the duty prescribed for it in that schedule.
This amount of Rs.100/- is substituted by earlier amount of Rs.10/-.
22. Section 5 speaks of an instrument which comprises or relates to other distinct matters shall be chargeable with the aggregate amount of duties, with which separate instruments, each comprising or relating to one of such matters, would be chargeable under this Act.
23. Section 68 provides that Collector has power to authorize officer to enter premises and inspect certain documents. When the Collector has a reason to believe that any of the instruments specified in Schedule-I has not been charged at all or incorrectly charged with duty leviable under this Act, in writing he can authorize any officer to enter upon any premises where any register, books, records, documents or proceedings relating to or in connection with any such instruments are kept and to inspect them and to take such notes and extracts as such officer deems necessary and such officer would also in the event of necessity can seize them and impound them under Section 33.
24. Section 31 speaks of adjudication as to the proper stamp when any instrument whether executed or not, and whether previously stamped or not, is brought to the Collector for his opinion as to the duty with with it is to be chargeable. The Collector is required to determine on payment of required fees, the duty with which the instrument is chargeable.
25. Section 31 postulates that if any instrument is non-executed and the same is brought to the Collector for his opinion, he has to determine the duty.
26. Section 32 requires the Collector to certify by endorsement on the instrument brought to him under Section 31 that the duty has been paid and the instrument is duly stamped or the duty is not paid up or it is not chargeable with the duty.
27. Section 32A(4) states that Collector of the District either suo motu or on receipt of information from any source within 2 years (now 6 years after 1994), from the date of registration of any instrument referred to in sub-Section (1) not being the instrument as in respect of each endorsement as has been made under Section 32, can call for examination of such instrument for satisfying himself as to the correctness of the consideration or of the market value of the property which is a subject matter of such instrument. He is required to do the same in accordance with sub-clause (2) & (3) of Section 32A.
28. Section 33 permits examination or impounding of instruments.
28.1 Section 33(1) is reproduced hereunder for profitable understanding :-
Examination and impounding of instruments:(1)
Subject to the provisions of section 32-A, every person having by law or consent of parties authority to receive evidence and every person in charge of a public office except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions shall if it appears to him that such instrument is not duly stamped, impound the same
29. If one looks at Schedule-I, it gives description of the instrument, proper stamp duty and kind of stamps to be used for such purpose.
29.1 Article 5 in Schedule-I described agreement or memorandum of an agreement or its records.
29.2 Article 20 speaks of conveyance, not being a transfer, charge or exempted under Article 56.
Transfer other than charged or exempted under Article 56 relating to both movable and immovable property is under this Article. Stamp duty prescribed is as payable under Clause
(a) and Clause (aa) of this Article. While examining the scheme of the Act and relevant provisions, it is to be noted once again that the entire transaction relates to the year 1996. The show cause notice is of the year 1997 and the order impugned is of July, 1998. Therefore, the question has to be examined carefully and it needs to be regarded as to whether relevant amendments made in the Act are prospective in nature, particularly, considering the definition of clause 2(ja), which defines immovable property . Explanation to immovable property under Section 2(ja) of the Act is inserted in the Act in the year 2007.
30.1 Section 3 of the Transfer of Property Act also defines immovable property which does not include standing timber, growing crops or grass. Instrument is defined as non-testamentary instrument.
31. The definition of immovable property under Section 2 (ja) includes benefits arising out of land and things attached to the earth or permanently fastened, if any, attached to the earth.
32. Words, attached to the earth means rooted in the earth as in case of trees and crops embedded to the earth and in the case of walls or buildings attached to mean what is so embedded for the permanent beneficial enjoyment of that to which it is attached, as defined under the Transfer of Property Act in Section 3 of the interpretation clause.
Explanation clause added and inserted by Gujarat Act 11 of 2007 states that where any plant and machinery of a factory transferred or sold with the intention of running the said factory, such transaction shall be deemed to be a transaction of immovable property. This amendment has come into force with effect from 1st April 2007. Thrust of legal contention of respondent-State that the Explanation added to the provision of immovable property being clarificatory in nature, the same requires to be applied retrospectively to the transaction in question, requires some dealings at the outset. Although, petitioner has harped on the point that what is to be struck at is conveyance and not transaction as such and with deeming fiction created by the Statute, retrospectivity can not be read in absence of any specific wordings, this aspect needs to be examined somewhat closely.
33.1 When the explanation is added to any provision, whether the same is only clarificatory or whether the same is substantive in nature shall have to be construed from the wordings used by the Legislature in the explanation. Whether such explanation is to be held retrospective or prospective also will depend on whether it merely clarifies the definition or, in fact, adds to any liability.
34. Mr. G.P. Singh in his commentaries on interpretation of statute as far as the explanation is concerned states as under :-
An explanation is at time appended to Section to explain the meaning of words contained in the Section. It becomes a part and parcel of the enactment. The meaning to be given to explanation must depend upon its terms and no theory of its purpose can be entertained unless it is to be inferred from the language used.. An Explanation,normally should be so read as to harmonize with and clear up any ambiguity in the main section and should not be so construed as to widen the ambit of the Section.
35. One would also like to at this stage, refer to some of the judgments relevant to adjudge the issues raised in this regard.
35.1. This Court in the case of Costal Gujarat Power Limited vs. Chief Controlling Revenue Authority reported in 2012 (Guj) 1270, decided the reference made by the Chief Controlling Revenue Authority, Gujarat State, where the petitioner had executed an indenture of Mortgage (for Delayed After Assets Deed) with the State Bank of India. When such documents was presented before Sub-Registrar, Mundra, the authority demanded the additional balance amount of Rs.50,41,000/- from the petitioner. The issue was forwarded to Deputy Collector where he held that the petitioner was liable to pay deficit stamp duty.
35.1 In the Revision Application of the petitioner under sub-section (1) Section 53 authority dismissed such revision, and thereafter, the petitioner made an application under Section 54(1)(a) of the of the Gujarat Stamp Act, 1958.
35.2 The Full Bench of this Court, while answering to the question referred during the reference, referred to the decision of the Apex Court rendered in Hindustan Lever & Anr. v/s. State of Maharashtra & Anr.
[Supra]. Relevant observations of the Bench with regard to the legal position as to how the taxing statute should be construed should be profitably reproduced hereinafter:-
17. It is settled legal position that the Taxing Statutes have to be strictly construed. In this connection, we may appropriately refer to the following observations of the Supreme Court in the case of The Commissioner of Income-tax, Patiala v. M/s. Shahzada Nand and Sons and others reported in AIR 1966 SC 1342 [pp 1347, paragraph 8]:
Before we advert to the said arguments, it will be convenient to notice the relevant rules of construction. The classic statements of Rowlatt, J., in Cape Brandy Syndicate v. Inland Revenue Commrs., (1921) 1 KB 64 at p. 71, still holds the field. It reads:-
"In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
To this may be added a rider: in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted. But even so, the fundamental rule of construction is the same for all statutes, whether fiscal or otherwise. "The underlying principle is that the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the Court as to what is just or expedient." The expressed intention must guide the Court. Another rule of construction which is relevant to the present enquiry is expressed in the maxim, generalia specialibus non-derogant, which means that when there is a conflict between a general and a special provision, the latter shall prevail. The said principle has been stated in Craies on Statute Law, 5th Edn., at p. 205, thus :
"The rule is, that whenever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply."
But this rule of construction is not of universal application. It is subject to the condition that there is nothing in the general provision, expressed or implied, indicating an intention to the contrary; see Maxwell on Interpretation of Statutes, 11th Edn., at pp. 168-169. When the words of a section are clear but its scope is sought to be curtailed by construction, the approach suggested by Lord Coke in In re; Heydon's case, (1584) 3 Co. Rep. 7a, yields better results:
"To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope, and object of the whole Act; to consider, according to Lord Coke : 1. What was the law before the Act was passed; 2. What was the mischief or defect for which the law had not provided; 3. What remedy Parliament has appointed; and 4. The reason of the remedy."
18. Applying the above principles to the facts of the present case, we find that the language of Section 3 and Section 2[1] are plain and unambiguous and are incapable of the interpretation canvassed by the State with the aid of Section 5 of the Act. The right to recover tax/duty flows from the clear and unambiguous provisions of law. The State is not entitled to recover any stamp-duty based upon its perception of the legislative intendment behind Section 5 of the Act. If upon plain reading of the provisions of the Act, the instrument in question does not fall within the scope and purview of Section 5 of the Act, on the basis of the State's perception or understanding of the Legislative intendment, no stamp-duty can be recovered as it is settled legal position that the mere intendment cannot create liability to pay duty/tax and such liability would only flow out of clear and unambiguous provisions of the charging Section.
19. The reliance placed by the State on the decision of the Supreme Court in the case of The Member, Board of Revenue, Appellant v. Arthur Paul Benthall reported in AIR 1956 SC 35 is, in our opinion, also misconceived. In the said matter before the Supreme Court, a Power of Attorney whereby the donee of the power was jointly and severally conferred the power to act for in his individual capacity and also as Executor, Administrator, Trustee, Managing Agent, Liquidator and all other capacities. The provisions of Sections 3 to 6 of the Act were considered to determine whether the said Power of Attorney involved distinct matters as contemplated by Section 5 of the Act. The Supreme Court in paragraph 15 concluded that the instrument comprised distinct matters in respect of several capacities of the donee of the power. In the facts of the said case, Section 5 was held to be applicable. On the other hand, the instrument involved in the present case is a single Deed of Mortgage executed by the borrower in favour of the Trustee Bank in terms of the Transfer of Property Act. Thus, the applicant is the mortgagor and the S.B.I., in the capacity of a trustee, is the mortgagee. The instrument does not involve either distinct matters or distinct transactions so as to attract Section 5 of the Act.
20. We have already pointed out that that stamp-duty is payable on the instrument and not on the transactions. At this juncture, we may profitably refer to the decision of the Supreme Court in the case of Hindustan Lever & Anr. V. State of Maharashtra & Anr., reported in AIR 2004 SC 326. In the said decisions, it was held that in construction of the deeds under the fiscal statutes like the Stamp Act, the Courts will have to go on the basis of what is stated in the document and not to carry out an exercise so as to ascertain its intended effect. The following observations are relevant and quoted below: [pp 335]
21. In the case of the Commissioner of Inland Revenue v. G. Anous and Co. and others (1891) Vol XXIII Queen's Bench Division 579, considered as to what interpretation has to be placed upon the expression "conveyance on sale" with regard to S. 70 of the Stamp Act, 1899 and held :-
"The term conveyance on sale includes every instrument and every decree or order of any Court or of any Commissioners, whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser or any other person on his behalf or by his direction."
22. The Court held that the thing, which is made liable to stamp duty is the "instrument." It is not a transaction of purchase and sale, which is struck at, it is the "instrument" whereby the purchase and sale are affected which is struck as. It is the "instrument" whereby any property upon the sale thereof is legally or equitably transferred and the taxation is confined only to the instrument whereby the property is transferred. If a contract of purchase or sale or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case would not fall within the section and no tax can be imposed. Taxation is confined to the instrument by which the property is transferred legally and equitably transferred.
(Emphasis supplied).
21. Therefore, merely because the intended effect is achieved by executing one single document as against different sets of documents, such fact would not enable the State authority to justify its conclusion that the result achieved by executing one single document comes within the purview of Section 5 of the Act.
22. We find from the document in question that the State Bank of India is the only mortgagee under the instrument and no rights in the mortgaged property had been crated in favour of secured parties or any other persons. Similarly, the SBI alone has been empowered to enforce the mortgage against the applicant under the said instrument. As would appear from Clause 15.1 of the instrument, it is specifically stated that the security created under the Deed in favour of the security trustee shall become enforceable by the security trustee upon the occurrence of an event of default. Moreover, we have already pointed out that nowhere in the Transfer of Property Act, 1882, it is stipulated that the payment of money advanced or to be advanced by way of a loan is to be secured by the borrower in favour of the lender. It can be secured by a person on behalf of the borrower and in favour of a person at the choice of a lender and thus, a mortgage may be created to secure payment of money advanced by a person other than a mortgagee. Therefore, the stamp-duty being the required duty under the Act, it is assessed on the basis of the instrument and not on consideration of the contents of another instrument which is also duly stamped under the Act. As pointed out by the Supreme Court in the case of Hindustan Lever and Anr. [supra], we find no substance in the contention of the learned advocate for the State that duty is to be paid as if separate mortgage deeds have been created in favour of all the lending Banks.
23. We also do not find any substance in the contention of Ms. Mehta that by taking aid of the Circular of the Government of Gujarat and the statement of objects and reasons in respect of Section 5 of the Act, we should interpret the above Section which would deviate from the provisions of the Act itself including Section 5. In construing a taxing statute, one is to look at what is clearly stated and there is no room for ascertaining the intendment. It is also settled law that there is no equity in the tax and there is no presumption as to tax and nothing is to be read and nothing is to be implied. In this connection, we may profitably refer to the following observation of the Supreme Court in the case of State of West Bengal v. Kesoram Industries Ltd. and Ors., reported in AIR 2005 SC 1646 [pp 1693] :
111.
The judicial opinion of binding authority flowing from several pronouncements of this Court has settled these principles: (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the Section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the tax-payer escaping if the letter of the law fails to catch him on account of Legislature's failure to express itself clearly. (See, Justice G.P. Singh, ibid, pp.638-639).
36. In the case of Jayshanker Ambalal Dave vs. Harjibhai Trikambhai Patel & Anr. reported in 1994(2) GCD 70(Guj), this Court held thus:-
5. As observed by the Supreme Court in its binding ruling in the case of State of Madhya Pradesh and others vs. Rameshwar Rathod, reported in AIR 1990 Supreme Court 1849. It is well-settled that the normal rule of construction is that a provision in a statute is prospective and not retrospective. But however, in the case of statutes which are merely declaratory or which relate to only matters of procedure or of evidence, it may have retrospective effect if there are indications to that effect or the manifest purpose compels one to construe the Act as such. In that case the Apex Court was required to consider whether the case was governed by the unamended provisions of Sec.6A of the Essential Commodities Act, 1955 ( the Act of 1955 for brief) prior to its amendment by Act XXX of 1974 or it was governed by the amended provision of Sec.6A of the Act of 1955. The Supreme Court found that there were no specific words in Act XXX of 1974 to indicate that the provisions were of retrospective effect. On the contrary, it was found in Sec.1(2) of Act XXX of 1974 that the amendment must be deemed to have come in effect on a particular date. In the light of these two features in Act XXX of 1974. the Supreme Court held in that case that Act XXX of 1974, was prospective and not retrospective in operation. According to Shri Patel for the petitioner. the aforesaid ruling of the Supreme Court in the case of Rameshwar Rathod (supra) will squarely govern the present case so far as the Amending Act is concerned.
As pointed out hereinabove, the well-settled principle of construction is that a statute affecting vested rights of a person or a class of persons cannot ordinarily have any retrospective operation. A substantial right of a person or a class of persons cannot be taken away with retrospective effect in absence of any clear intention of the Legislature in that regard. Section 32E as it existed prior to its amendment by the Amending Act read:-
The balance of any land after the purchase by the tenant under section 32 shall be disposed of in the manner laid down in section 15 as if it were land surrendered by the tenant.
After amendment by the Amending Act it reads:
The balance of any land after the purchases by the tenant under sec.32 shall be disposed of by sale by the Collector in the manner specified in clause (c) of sub-section (2) of sec.32P, and thereupon the provisions of sub-section(5) of Sec.32P shall apply to such sale.
It becomes clear that the statutory provision engrafted in Sec.32E of the Act prior to its amendment by the Amending Act was conferring a substantive right on landlord to claim the tenanted land if its statutory sale in favour of the tenant became ineffective under Sec.32A or 32E of the Act. Of course, the right of the landlord in that regard was subject to fulfilment of certain conditions under Sec.15 thereof as it existed at that time. Nonetheless, the landlord was entitled to claim the tenanted land if its statutory sale under the Act became ineffective. The Amending Act has taken away that right of the landlord irrespective of fulfilment of the conditions prescribed in Sec.15 thereof as existing at the relevant time. The tenanted land in that case is made disposable in the hands of the Collector. It thus becomes clear that the Amending Act has affected the substantive right of a landlord like the present petitioner. It is obvious that it does not relate to to any procedural law or any rule of evidence. It is also not declaratory in nature. In view of the settled principle of interpretation, the said provision of the Amending Act will have to be construed as prospective and not retrospective in operation.
37. In the case of Punabhai Dhedubhai Bariya vs. Patel Chhaganbhai Parsottamdas and another reported in 1983 G.L.H.401, the question which the Court was confronted with was amendment in sub-Section(1) of Section 43 of the Bombay Tenancy and Agricultural Lands Act, 1948, as amended by Gujarat Act 30 of 1977. The said amendment sought to affect substantive rights of the parties and it also tried to invalidate even agreement to transfer the concerned land in favour of the third parties. Prior to the said amendment, such agreements were not hit by Section 43 of the Act and in order to plug such lacuna and loophole, the legislature intervened and brought about the aforesaid amendment in 1977. The Court held that such amendment which affected substantive rights of the parties needs to be treated as prospective unless such amendment is specified as retrospective by legislature.
38. Apex Court in case of Delta Engineers v. State of Goa & Ors., reported in [(2009) 12 SCC 110] was required to consider amendments to the Rules. In 1992 & 1994, Lieutenant Governor of Goa, Daman & Diu made amendment in Entry 21 of the 1st Schedule to the Goa, Daman & Diu Ports Rules, 1983.
38.1 The 1992 Amendment extended the definition of Open Plots to include riverine land and 1994 amendment further extended scope of levy of tidal areas, which covered river area adjoining appellant s private land.
38.2 The High Court upheld the legality and statutory vires of the levy and upheld the retrospectivity of the amendment by holding that the amendments were clarificatory in nature and hence, the appellant was liable to pay rest for the entire period right from 1983.
38.3 When challenged before the Apex Court, it held that the Amendments of 1992 & 1994 to the Rules are not clarificatory nor retrospective in operation, in absence of such provision specifying bar retrospectivity as also in absence of such circumstances warranting such interpretation. The Apex Court held thus :-
The Amendment Rules do not provide that they are retrospective in operation. Nor do the circumstances warrant such an inference. In fact, the contention of the respondents is not that power to levy fees/charges for use of riverine land was created/vested in the Port Authorities, by virtue of the Amendment Rules and that such power was given to levy fees/charges retrospectively. The contention has been that the power to levy fees/charges existed ever since the Rules came into force on 5/4/1984 and that position was merely clarified by the Amendment Rules in 1992 and 1994.
We have already held that the Amendment Rules of 1992 and 1994 are not clarificatory, but are provisions investing the Port Authorities with the power to levy and collect charges for occupation of government riverine land. Therefore, the demand for charges for use of government riverine land is valid upon from 3.3.1994. Therefore, the Port Authorities could not demand or recover any amount for the period prior to 3.3.1994. The Port Authorities are therefore liable to refund any amount recovered within three years prior to the date of the writ petition. Obviously, any amount paid during a period beyond three years from the date of the writ petition, is not recoverable as barred by delay and laches.
39. It would be worthwhile to note some of the vital authorities on the interpretation of statute when explanation is added :-
[a] In case of Keshavji Ravji & Company v. Commissioner of Income-tax, reported in AIR 1991 SC 1806, the Apex Court held and observed as under :-
6.
As long as there is no ambiguity in the statutory language resort to any interpretative process to unfold the legislative intent become impermissible. The supposed intention of the legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature. .. .. .. ..Artificial and unduly latitudinarian rules of construction which, with their general tendency to "give the tax- payer the breaks", are out of place where the legislation has a fiscal mission. Indeed, taxation has ceased to be regarded as an "impertinent intrusion into the sacred rights of private property" and it is now increasingly regarded as a potent fiscal-tool of State policy to strike the required balance-required in the context of the felt needs of the times between citizens' claim to enjoyment of his property on the one hand and the need for an equitable distribution of the burdens of the community to sustain social services and purposes on the other.
xx xx xx
14. An 'Explanation', generally speaking, is intended to explain the meaning of certain phrases and expressions contained in a statutory provision. There is no general theory as to the effect and intendment of an Explanation except that the purposes and intendment of the 'Explanation' are determined by own words. An Explanation, depending on its language, might supply or take away something from the contents of a provision. It is also true that an Explanation may this is what Sri Ramachandran suggests in this case be introduced by way of abundant caution in order to clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative errors and to place what the legislature considers to be the true meaning beyond controversy or doubt. Hypothetically, that such can be the possible purpose of an 'Explanation' cannot be doubted.
15. The notes on clauses appended to the Taxation Laws (Amendment) Bill, 1984, say that Clause 10 which seeks to amend Section 40 will take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years. The express prospective operation and effectuation of the 'Explanation' might, perhaps, be a factor necessarily detracting from any evincement of the intent on the part of the legislature that the Explanation was intended more as a legislative exposition or clarification of the existing law than as a change in the law as it then obtained. In view of what we have said on point (c) it appears unnecessary to examine this contention any further.
[b] This Court, in case of Paschim Gujarat Vij Company Limited v. Paras Ship Breakers Limited., reported in 2010 (2) GLH 626, held and observed as under :-
10.3 In case of S. Sundaram Pillai, etc. v. V. R. Pattabiraman reported in AIR 1985 Supreme Court 582, the Apex Court discussed the impact of an explanation in a statutory provision and held and observed as under
:-
45. We have now to consider as to what is the impact of the Explanation on the proviso which deals with the question of wilful default. Before, however, we embark on an enquiry into this difficult and delicate question, we must appreciate the intent, purpose and legal effect of an Explanation. It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in 'Interpretation of Statutes' while dwelling on the various aspects of an Explanation observes as follows:
"(a) The object of an explanation is to understand the Act in the light of the explanation.
(b) It does not ordinarily enlarge the scope of the original A section which it explains, but only makes the meaning clear beyond dispute."
46. Swarup in 'Legislation and Interpretation' very aptly sums up the scope and effect of an Explanation thus:
"Sometimes an explanation is appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. The proper function of an explanation is to make plain or elucidate what is enacted in the substantive provision and not to add or substract from it. Thus an explanation does not either restrict or extend the enacting part; it does not enlarge or narrow down the scope of the original section that it is supposed to explain .. The Explanation must be interpreted according to its own tenor; that it is meant to explain and not vice versa."
52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is-
(a) to explain the meaning and intendment of the Act itself, (b) where there is
any obscurity or vagueness in the main enactment, to clarify the same so a- to make it consistent with the dominant object which it seems to subserve,
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful,
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.
[c] In case of M/s. Aphali Pharmaceuticals Limited v. State of Maharashtra & Ors., reported in AIR 1989 SC 2227, the Apex Court observed thus;
32. An Explanation, as was found in Bihta Marketing Union v. Bank of Bihar, AIR 1967 SC 389: (1967) 1 SCR 848, may only explain and may not expand or add to the scope of the original section. In State of Bombay v. United Motors, AIR 1953 SC 252: (1953) SCR 1069,it was found that an Explanation could introduce, a finction or settle a matter of controversy. Explanation may not be made to operate as "exception" or "proviso". The construction of an Explanation, as was held in Collector of Customs v. G. Dass & Company, AIR 1966 SC 1577, must depend upon its terms and no theory of its purpose can be entertained unless it is to be inferred from the language used. It was said in Burmah Shell Oil Limited v. Commercial Tax Officer, AIR 1961 SC 3 15: (1961) 1 SCR 902, that the explanation was meant to explain the Article and must be interpreted according to its own tenor and it was an error to explain the Explanation with the aid of the Article to which it was annexed. We have to remember what was held in Dattatraya Govind Mahajan v. State of Maharashtra, AIR 1977 SC 915 (928): (1977) 2 SCR 790, that mere description of a certain provision, such as "Explanation" is not decisive of its true meaning. It is true that the orthodox function of an explanation is to explain the meaning and effect of the main provision to which it is an explanation and to clear up any doubt or ambiguity in it, but ultimately it is the intention of the legislature which is paramount and mere use of a label cannot control or deflect such intention. State of Bombay v. United Motors, (supra) laid down that the interpretation must obviously depend upon the words used therein, but this must be borne in mind that when the provision is capable of two interpretations, that should be adopted which fits the description. An explanation is different in nature from a proviso for a proviso excepts, excludes or restricts while an explanation explains or clarifies. Such explanation or clarification may be in respect of matters whose meaning is implicit and not explicit in the main section itself. In Hiralal Ratanlal v. State of U.P., [1973] 1 SCC 216 (225), it was ruled that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named that provision as an Explanation. In all these matters courts have to find out the true intention of the Legislature. In D.G. Mahajan v. State of Maharashtra, (supra) xx this Court said that legislature has different ways of expressing itself and in the last analysis the words used alone are repository of legislative intent and that if necessary an Explanation must be construed according to its plain language and 'not on any a priori consideration'.
[d] In case of S. Sundaram Pillai Vs. V.R.Pattabiraman, reported in AIR 1985 SC 582, the Apex court observed that,
45. We have now to consider as to what is the impact of the Explanation on the proviso which deals with the question of wilful default. Before, however, we embark on an enquiry into this difficult and delicate question, we must appreciate the intent, purpose and legal effect of an Explanation. It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in 'Interpretation of Statutes' while dwelling on the various aspects of an Explanation observes as follows:-
"(a) The object of an explanation is to understand the Act in the light of the explanation.
(b) It does not ordinarily enlarge the scope of the original A section which it explains, but only makes the meaning clear beyond dispute."
46. Swarup in 'Legislation and Interpretation' very aptly sums up the scope and effect of an Explanation thus: "Sometimes an explanation is appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. The proper function of an explanation is to make plain or elucidate what is enacted in the substantive provision and not to add or substract from it. Thus an explanation does not either restrict or extend the enacting part; it does not enlarge or narrow down the scope of the original section that it is supposed to explain .. The Explanation must be interpreted according to its own tenor; that it is meant to explain and not vice versa."
47. Bindra in 'Interpretation of Statutes' (5th Edn.) at page 67 states thus :"An explanation does not enlarge the scope of the original section that it is supposed to explain. It is axiomatic that an explanation only explains and does not expand or add to the scope of the original section.. The purpose of an explanation is, however, not to limit the scope o the main provision.. The construction of the explanation must depend upon its terms, and no theory of its purpose can be entertained unless it is to be inferred from the language used. An 'explanation' must be interpreted according to its own tenor ."
48. The principles laid down by the aforesaid authors are fully supported by various authorities of this Court. To quote only a few, in Burmah Shell Oil Storage and Distributing Co. Of India Ltd. and Anr. v. Commercial Tax Officer and Ors.(l) a Constitution Bench decision, Hidayatullah, J. speaking for the Court. Observed thus:
"Now, the Explanation must be interpreted according to its own tenor, and it is meant to explain cl.(1)(a)of the Article and not vice versa. It is an error to explain the Explanation with the aid of the Article, because this reverses their roles."
49. In Bihta Cooperative Development Cane Marketing Union Ltd. and Anr. v The Bank of Bihar and Ors(i)., this Court observed thus:
"The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section, It should not be so construed as to widen the ambit of the section."
50. In Hiralal Rattanlal's case (supra), this Court observed thus:-
"On the basis of the language of the Explanation this Court held that it did not widen the scope of clause (c) But from what has been said in the case, it is clear that if on a true reading of`an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named that provision as an Explanation."
51. In Dattatraya Govind Mahajan & Ors. vs. State of Maharashtra & Ors. ( l977)2 S C.R. 790. (2)., Bhagwati, J. Observed thus:
"It is true that the orthodox function of an explanation is to explain the meaning and effect of the main provision to which it is an explanation and to clear up any doubt or ambiguity in it.. Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations."
52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is-
(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so a- to make it consistent with the dominant object which it seems to subserve,
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful,
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.
40. Having substantially discussed the ambit of explanation in general, one may proceed to examine the scope and application of explanation in this case. Whether it is clarificatory and such change is permitted to be applied with retrospective effect shall need to be briefly examined from the effect of the explanation. It would be apt to recall the explanation introduced in the year 1997 being explanation to Section 2 [ja].
immovable property includes land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.
Explanation-
Where any plant and machinery of a factory transferred or sold with the intention of running the said factory, such transaction shall be deemed to be a transaction of the immovable property.
40.1 In this connection, issue whether the plant and machineries can be said to be attached to earth and part of immovable property, prior to express provision needs to be briefly touched.
40.2 It is only after the explanation to definition of clause (ja) to Section 2 immovable property that the law has crated a deeming fiction. Without such amendment, whether such plant and machineries is part of immovable property or not is essentially held to be the question in the realm of law and facts.
40.3 Madras High Court in case of K.N Subramanium Chhattiar v. M. Chindambaram Servai, reported in AIR 1940 Madras 527 was deciding whether machinery is a movable property or immovable within the meaning of Section 3, Explanation 1 of the Transfer of Property Act. It held that it was not immovable property by holding that while so determining, regard must be had not only to the nature of attachment by which engine is fixed on the ground, but, also to the title of person fixing it in immovable property and object of transaction, etc. 40.4 In yet another decision, Madras High Court in case of Perumal Naicker v. T. Ramaswamy Kone, reported in AIR 1969 Madras 346 also determined similar issue whether engine attached to the earth is immovable property. It held the same to be a mixed question of fact and law, by holding that the same needs to be decided in light of particular facts.
40.5 In case of J.H Subhiah v. Govindrao Bhiwaji, reported in AIR 1953 Nagpur 224, the Division Bench laid down the tests to determine whether the machinery attached to land became immovable property namely (i) the degree or mode of annexation (ii) the object of annexation and held that, being the question of fact, needs to be determined upon particular facts and circumstances. In the case before Nagpur Bench, it was not held to be an immovable property.
40.6 Apex Court in case of Commissioner of Central Excise, Ahmedabad vs. Solid & Concrete Engineering Works & Ors., reported in 2010 (3) GLR 2108, was deciding the question whether the plant was embedded into the earth and is therefore, movable or immovable property and it held thus :-
22.
The English law attaches greater importance to the object of annexation which is determined by the circumstances of each case. One of the important considerations is founded on the interest in the land wherein the person who causes the annexation possesses article that may be removed without structural damage and eve articles merely resting on their own weight are fixtures only if they are attached with the intention of permanently improving the premises. The Indian law has developed of similar lines and the mode of annexation and object of annexation have been applied as relevant test in this country also. There are cases where machinery installed by monthly tenant was held to be moveable property as in cases where the lease itself contemplated the removal of the machinery by the tenant at the end of the tenancy. The mode of annexation has been similarly given considerable significance by the courts in this country in order to be treated as fixture. Attachment to the earth must be a defined in Section 3 of the Transfer of Property Act. For instance a hut is an immovable property, even if it is sold with the option to pull it down. A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built.
23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal-shaping and electro-plating which was attached be bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures.
24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons:
(i) The plants in question are not per se immovable property.
(ii) Such plants cannot be said to be attached to the earth within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.
(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.
(iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed.
40.7 In light of the discussion above, the amendment brought in the statute adding explanation to the definition of immovable property, will create essentially a question of interpretation in respect of intention of the parties, to be gathered from the conveyance, whether the transfer of immovable property with plant and machinery was with the intention of running the factory and tests laid down by the Apex Court shall need to apply each time the issue arises.
40.8 When the Explanation was brought on the statute book, the language does not specifically or by necessary implication indicate the same to be intending to impair existing obligation or affect the right of the parties.. In absence of any intention to affect existing right, such deeming fiction must be held to be prospective in nature.
40.9 Even if it is recognized that the amendment was brought with retrospective effect, in exercise of the powers of scrutiny by the Collector, notice issued is unspecific and vague on this aspect and certainly the adjudication cannot travel beyond the notice as the very foundation of the proceedings is valid notice. Moreover, whether plant and machineries is sold with the intention of running a factory shall need to be examined in each case and that exercise is in the realm of interpretation. In this case, that exercise is also not necessary with the aid of documents on record in as much as the issue to be discussed hereinafter, this Court is convinced that the order impugned can be quashed.
41. That brings this Court to the most vital question as to whether the authority which was presented the conveyance in question, during the course of discharge of its performance was required to see the transaction or it was only obliged to look at what has been conveyed. Every document, which creates transfers, limits, extends or explains or records the right or liability is an instrument, which, of course, does not include as per Section 2(l) of the Act bills of exchange or promissory note bill of lading etc. The moot question, therefore, requires to be answered is whether the transaction translated into an agreement made on 22.2.1996 between KJL and RIL, can be charged by the Bombay Stamp Authority or is it the conveyance presented before the authority on dated 8th October 1996 together with building structure and types of construction thereof, was required to be looked at.
42. It appears from the agreement entered into between the vendor and the vendee that the vendor had agreed to sell, transfer and assign and purchaser had agreed to purchase and acquire from the vendor the leasehold immovable property described in schedule of the said agreement, which is a piece of land known as plot No.3000 situated at Ankleshwar notified area consisting of Revenue survey Nos. 47 together with building structures and all types of constructions thereon. It has also mentioned moveable assets, contents of which were reflected in the schedule to this agreement. In other words, land and plant & machinery were agreed to be sold for aggregate sum of Rs.21 crores. It also provided for the mode of payments and execution of necessary documents in this connection either in the name of purchaser or any of its designate nominees or its successor.
43. After the said agreement was executed on 22.2.1996, what is found from the record as mentioned hereinbefore is that the movable properties have been sold and transferred to ICICI Bank by the original purchaser. As is also clearly mentioned in the agreement, the vendor had agreed to transfer the entire movables in the name of any of the designated nominees and it appears that the movables mentioned therein had been requested to be transferred in the name of ICICI Bank with some details of manner of payment. The contents of communication which was addressed by RIL to the Chairman and M.D of Vendor KJL dated 30.8.1996, reads thus:-
This has reference to the Agreement dated 22nd February, 1996 between Khatau Junker (Vendor) and Rallis India Ltd. or its designated nominees (Purchaser) in respect of the sale of the Agrochemicals Plants of the Vendor.
As discussed with you, out of the total purchase consideration of Rs.21,00,00,000( Rupees Twenty One Crores only), a sum of Rs.50,00,000/- has already been paid to the Vendor by way of earnest money prior to the execution of the Agreement by Cheque No.913258 dated 22nd March, 1996. The balance amount of Rs.20,50,00,000 was required to be paid as under:-
(a) Out of the said sum of Rs.18,50,00,000/-, the Purchaser to pay directly to the secured creditors such amount as is determined to be payable by the Vendor to the secured creditors in repayment of the secured loans then outstanding, and the balance, if any, to be paid by the Purchaser to the Vendor.
(b) The balance amount of Rs.2,00,00,000/- due and payable on the transfer date shall be paid simultaneously with the aforesaid sum of Rs.18,50,00,000 by deposit with the Vendor s Solicitors, Crawford Bayley & Company in escrow account.
(c) As indicated to you earlier, Rallis Industrial Chemicals Limited is one of our designated nominees for purchase of the leasehold property at Ankleshwar.
It is, however, now for business reasons agreed between the parties that the movable plant and machinery of the Vendor s Agrochemicals Plants aggregating to Rs.16 crores shall be purchased directly by the Industrial Credit & Investment Corporation of India Ltd.(ICICI) who is one of the designated nominees of the Purchaser, and the said amount shall be payable to the Vendor and/or the secured creditors directly by ICICI.
Of the balance amount of Rs.4.5 crores, an amount of Rs.2.50 crores shall be paid by the Purchaser to the secured creditors, in accordance with Clause 3(b) of the Agreement dated 22nd February, 1996 and Rs.2 crores shall be placed in escrow account with Crawford Bayley & Company in accordance with Clause (c) of the Agreement dated 22nd February, 1996.
All the other terms and conditions as laid down in the agreement dated 22nd February, 1996 remains unchanged.
Please return the duplicate copy of this duly signed by you in token of your confirmation of the above.
It was for the financial reason the movable plant and machinery of the vendors agro-chemical plants was decided to be purchased directly by the ICICI Bank as one of the designated nominees of the purchaser, who directly decided to pay to the vendor.
43.1 By an invoice dated 27.9.1996 for the consideration of the sum of Rs.17.12 crores, the movable property has been transferred to ICICI Bank by the vendor-KJL, at the instance of RIL. The description of the movable properties is specified in the third schedule of the said agreement on 27.9.1996 which included plants,lab equipments, etc. the ICICI bank by a lease agreement in favour of the RICL (the present petitioner) executed the lease of entire movable assets for the period of 84 months at a rate prescribed in the said lease agreement. Thus, the movable property by way of leasehold property has been separately given to the present petitioner. For the total sum of Rs. 16 Crores, this transaction was entered into and Rs. 1.12 crores towards the sales tax was paid thereon. No dispute till the date is raised by the respondent-State in respect of such transfer of movables in the manner in which it is done nor in any proceedings initiated for less payment of sale tax. Neither ICICI Bank nor petitioner is questioned either for the modus or the duty till the date.
44. Deed of transfer and assignment came to be executed between KJL and the present petitioner in respect of the immovable properties on 8.10.1996. Prior to the said instrument executed by and between the parties in respect of the factory buildings/structures, as noted above, all machinery apparatus plants, fixtures and furnitures being movable in nature had already been transferred for consideration of the sum of Rs. 17.12 crores. It is not in dispute that the value of the said immovable property is otherwise fixed at Rs.4 crores, and duty liability under the Bombay Stamp Act has been questioned by including the total amount of consideration of Rs. 21 Crores which includes the consideration for plant and furniture and fixtures.
45. This instrument transferring immovable property got registered as per the law prevalent in the State. Impugned notice, however, came to be issued on 29.10.1997 addressed to the Director of the present petitioner by the Collector and Additional Superintendent of Stamps inter alia contending that the document registered with the Sub-Registrar s Office, Ankleshwar on 12.5.1997 vide registration No.1673 reflected the amount of Rs.21 crores and value of property since was shown at only of Rs. 4 crores and stamp duty of Rs. 56 lakhs had been paid on this amount of Rs. 4 crores. It is alleged that this would amount to the evasion of the stamp duty and hence the petitioner was given an opportunity to present themselves on 10.11.1997.
46. Reply to the said show cause notice has been filed on 15.12.1997. This bears the reference of the impugned notice as well as appearance of the petitioner on 24.11.1997. It is explained clearly that much prior to the immovable property was transferred for sum of Rs. 4 crores, movable assets costing Rs.17 crores have been taken on lease from ICICI and therefore the deed of transfer and assignment when transfers only leasehold immovable property, no further duty is leviable..
47. Order impugned mentions that yet another adjournment was sought by the petitioner on 23.2.1998, however, no one appeared for and on behalf of the petitioner. It refers to the amendment made from 4.4.1997 in the Bombay Stamp Act which included both the movable and immovable properties, and therefore, the authority took note of the total consideration of Rs. 21.97 crores It had also referred to the concerned officer and called for the report for calculating the market value of the immovable property which has been valued at Rs. 4.97 crores. The stamp duty under Article 20A had been worked out at Rs. 3,07,64,510/-. It is also held in the said order that the stamps of Rs. 56 lakhs had been used on a separate paper without any writing thereon and Sections 13 and 14 required writing on such stamps and therefore invoking Section 16 of the Bombay Stamp Act as also Section 39(1)(b), penalty of Rs. 60 lakhs had been levied on the petitioner and total demand of Rs. 3,07,64,510/- crores had been confirmed with 24% interest as per Section 46 of the Bombay Stamp Act.
48. Although apparently this has been alleged to be an attempt on the part of the petitioner-Company to save huge amount of stamp duty by segregating movables and immovables and admittedly paying the stamp duty only on the sum of Rs. 4 Crores, which is valued to be the market price of the immovable property, in none of the manners, such action of respondent can be sustained.
49. It is very apparent from this entire series of transaction that the agreement of 22.2.1996 entered into between the vendor and RIL purchaser included successor and the designated nominees of the company. This agreement is an agreement to sell both movable and immovable properties by vendor to the buyer, or to any of the designated nominees or its successor. Immovable property has been described in Schedule-II which is a plot along with building structure of other constructions thereon, described in detail with all four directions. This agreement also had spoken of transfer of movable properties as detailed in Schedule-III of the said agreement. This essentially had included the machineries and the plants of the factory.
50. What was laid before the Stamp authority was a conveyance of sale of immovable property. As held by the Queen s Bench and later on reiterated by the Apex Court, it is not the transaction of purchaser and sale which is struck at, it is an instrument whereby purchase and sale are effected, which is struck at . If without any instrument, any one can carry through the purchase and sale seeking thereby to transfer the property, legislature would not reach such transaction. In case of Hindustan Lever (supra) this has been reiterated by the Apex Court which held that Section 3 of the Bombay Stamp Act is a charging Section and the duty charged by the State Legislature is not on the transaction but is on the execution of the instrument. The measure of charging of stamp duty may be fixed or on ad veloram basis as is to be determined by the Legislature on the basis for computation of stamp duty can be determined by the Legislature, and thus, the Court held that the stamp duty is levied on the instrument and the measure is the valuation of the property transferred.
The instrument presented in the instant case, is the one by which immovable property is transferred and that property is valued at Rs.4 crores and therefore on such sale consideration of Rs. 4 Crores, stamp duty valued at Rs. 56 lakhs had been paid. Tax is confined to instrument by which property is transferred and stamp is to be levied as confined to the instrument.
When the explanation to Section 2(ja) of the Stamp Act cannot be made applicable per se to hold plant as immovable property; as discussed hereinabove, there is no way in which such transaction made by the parties could be charged by the Stamp authorities, as the transfer of movables by way of invoice in favour of the ICICI Bank was done long ago and the same is when permissible under the law, only by looking at the agreement which was never presented before the authority, it cannot decide to charge the entire amount of consideration; if otherwise law does not permit.
52. In the present petition a new case is attempted to be set out by the State by saying that it is an agreement between the parties dated 22.2.1996 of total consideration of Rs. 21 crores, which is required to be charged inasmuch as reference in the notice is of instrument dated 8.10.1996, the deed of transfer and assignment between the vendor and present petitioner and not of the agreement dated 22.2.1996. Even if it is assumed without acceptance of contention of respondent that since there is a reference of such agreement, in the document of transfer on piercing the true nature of transactions, the said agreement as per the Bombay Stamp Act is to be charged as contended by the learned Assistant Government Pleader, no duties then also can be charged as notice since is completely silent on the agreement dated 22.2.1996, the petitioner cannot be saddled with the liability of even putting up its case in defence in this regard, let alone of payment without due opportunity in a such scenario.
53. It appears that the Collector authorizes under the Act, the officer to inspect certain documents on entering the premises, it is by exercising the powers under Section 68 that the examination has been done and during the course of such examination, such officer as deemed it necessary, he has exercised power to seize or impound the documents under Section 33.
54. In the instant case, such person during the course of performance of his function when found that the document is not duly stamped, he had chosen to impound the same. The notice appears to be wrongly given under the heading of section 68 of the Bombay Stamp Act as this provision does not contemplate any notice. However, clause 4 of Section 32A permits the Collector to determine the proper stamp duty either suo motu or on the receipt of information from any source and he can call for examination of the instrument for determining the correctness of the consideration of the market value of the property.
55. The Collector within a period of 2 years could have suo motu chosen to call for the instrument and determine the market value of the property or the correctness of the consideration. This, of course, he is authorized also to do if somebody brings to his notice that particular instrument which was presented for the registration had insufficient stamp duty or there was incorrect market value of the property being the subject matter of the instrument. In such circumstances, the determination of the market value of the property shall be in accordance with sub-clause (2) & (3) of Section 32A.
56. Authority requires to avail the parties a reasonable opportunity of being heard and to determine the true market value of the property which is subject matter of the instrument and to insist on the proper duty payable thereon. It is well settled law that unless the report obtained for determining the market value or the copy of the Jantri published by the State Government is not furnished to the party concerned, such act of levying the enhanced duty would be violative of the principles of natural justice. It is sine quo non to supply the document sought to be relied upon for arriving at the market value to the party concerned. This is well laid down in the case of Manubhai Vaghjibhai Dabhi vs. State of Gujarat & Others (Supra).
57. In the instant case, the petitioner has neither been provided the copy of the report obtained for determining the market value of Rs.4.97 crores (rounded off) nor has any other documents been furnished. Notice since also is silent on this aspect. Order impugned dated 21st July 1998 requires to be interfered with and is required to be quashed with consequential proceedings of recovery and set aside with the following directions :
{a} Respondent is precluded from raising any demand in respect of the transaction dated 22nd February 1996 in the notice proceedings initiated on 29th October 1997;
{b} Respondent is, however, permitted to adjudicate in respect of immovable property transferred by way of conveyance dated 8/10/1996, on availing the copy of report of market value of property on a copy of Jantry prevalent at the time and on affording due opportunity of personal hearing to the petitioner in respect of such enhanced sum of Rs. 97 lakhs.
{c} Such process shall be completed within 24 weeks of the receipt of these directions. Needless to state that the petitioner shall cooperate in completion of the process as scheduled.
Petition is allowed to the aforesaid extent. Rule is made absolute accordingly. No order as to costs.
{Ms. Sonia Gokani, J.} Sudhir/Prakash* Page 52 of 52