Indian Kanoon - Search engine for Indian Law

6. The learned Senior counsel appearing for the petitioner would contend that the respondents 1 to 3 failed to take note of the statutory provisions contained in Section 3 (3) of the Indian Stamp Act wherein it was clearly held that no duty shall be chargeable in respect of any instrument executed by, or on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the special economic zone. It is not in dispute that the property covered in the lease deed is situate within the non-processing area of SEZ and therefore, as per Section 3 (3) of the Indian Stamp Act, the petitioner is entitled for exemption of stamp duty. According to the learned Senior counsel for the petitioner, amendment to Section 3 of the Indian Stamp Act was effected by Section 57 of the SEZ Act on 10.02.2006. Pursuant to such amendment, Part III of the Third Schedule to the SEZ Act amendment to the Indian Stamp Act, 1989 has been effected. By virtue of such amendment, any instrument executed by a Developer or Co-developer shall not be chargeable with any stamp duty. In the present case, admittedly, the fourth respondent was a recognised Co-developer who has executed the lease in favour of the petitioner. The respondents also failed to consider that it was not an absolute sale of the property in favour of the petitioner disentitling her to get the stamp duty exemption or the petitioner is going to enjoy the infrastructural amenity created with in the non-processing area of the SEZ. The nature of the instrument is a lease deed, executed in favour of the petitioner with the intention to rent it out to the employees of the SEZ. Therefore, according to the learned Senior counsel for the petitioner, there is no embargo to either entertain the lease deed presented by the petitioner for registration or to grant exemption in her favour.

9. As regards the amendment brought to Section 3 (3) of the Indian Stamp Act, the learned Additional Advocate General would contend that such amendment was brought to serve the purpose of SEZ. Further, Section 51 of the SEZ Act specifically contemplates that the provisions of the SEZ Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. Therefore, according to the learned Additional Advocate General, Section 51 of the SEZ Act has an overriding effect to the provisions of Section 3 (3) of the Indian Stamp Act and therefore, Section 3 (3) of the Indian Stamp Act cannot be pressed into service in this case.

11. I heard the learned Senior counsel for the petitioner, learned Additional Advocate General appearing for the respondents 1 to 3 and the learned counsel for the fourth respondent. I had perused the materials placed on record. The question that arise for consideration in this writ petition is as to whether the first respondent is justified in refusing to grant of exemption on payment of stamp duty in favour of the petitioner.

12. Before dealing with the rival contentions made on behalf of the counsel on either side, it is necessary to look into the object with which the SEZ Act came to be enacted. The Act has been enacted to provide for establishment, development and management of the Special Economic Zone for promotion of experts and for matters connected therewith. Section 2 (f) of the SEZ Act defines a "Co-developer" which means a person, who or a State Government which, has been granted by the Central Government, a letter of approval under sub-section 12 of Section 3. Section 2 (g) defines the word "Developer", which means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section 10 of Section 3 and includes an Authority and a Co-developer. Section 3 of the Act provides for procedures to establish a Special Economic Zone, either jointly or severally by the Central Government, State Government or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing zone. Section 50 of the Act empowers the State Government to grant exemption for the purpose of giving effect to the provisions of this Act with particular reference to grant of exemption from the State Taxes, levies and duties to the developer or the entrepreneur. Thus, the object with which SEZ Act has been enacted is to promote SEZ, invite investments and to encourage entrepreneurs and others persons interalia to grant certain concessions in the matter of levy of State tax and duties to more effectively achieve the object of the Act.

14. Section 6 of the SEZ Act, 2005 classifies the processing area and non-processing area. As per Sub-section (c) of Section 6, the non-processing area is one where there are activities other than those specified under clause (a) and (b) thereof which relates to areas meant for setting up Units for activities such as manufacture of goods, or rendering service, including area earmarked for providing warehousing facilities. As per Section 5 of the SEZ Act, the Board has to grant approval in favour of the fourth respondent as a Co-Developer. As per Rule 11 of the SEZ Rules, the areas with the SEZ have been demarcated as processing zone and non-processing zone. Of course, there is a prohibition contained under Rule 11 (10) of the SEZ Rules relating to lease of vacant lands in non-processing area if it is meant for business and social purpose such as educational institution, hospital, hotel, recreation and entertainment facilities, residential and business complex to any person except a Co-developer approved by the Board. The proviso to Rule 11 (10) categorically stipulates that the Developer or Co-developer may lease the completed infrastructure along with the vacant land for such purpose. Therefore, as per Rule 11 (10), the lands within the non-processing area has to be leased out or otherwise transferred only after providing complete infrastructure thereof and it should not be leased out as vacant land. The second proviso to SEZ Rule says that adequate housing facilities shall be made not only for the management and office staff but also for the workers working in the SEZ. However, after amendment inserting Rule 11 (A), even the non-processing area shall be earmarked for business and social purpose after obtaining approval from the Central Government, including a No Objection Certificate from the concerned State Government. Thus, there is no embargo or prohibition anywhere in the Act and Rules to lease out the completed infrastructural amenity along with the vacant land appurtenant therewith in the non-processing area to third parties like the petitioner. What is prohibited is that it should not be used for any other purpose except for residential use and even if it is meant for any other purpose, prior permission has to be obtained from the Developer and a No Objection Certificate from the concerned State Government. In this case, the property covered under the lease deed is a residential unit and not a vacant land situate within a non-processing area. The intention of the petitioner is to take the property on lease and to lease it out to the employees of the SEZ. Thus, when the object sought to be achieved by the Act and Rules is fulfilled by reason of the petitioner letting out the leased property situate within the non-processing area for rent to the employees of the SEZ, then the petitioner is entitled for exemption from stamp duty.