Full Judgment Text
REPORTABLE
2024 INSC 358
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3391 OF 2011
LIFE INSURANCE CORPORATION OF INDIA ...APPELLANT(S)
VERSUS
THE STATE OF RAJASTHAN AND ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO. 3849 OF 2011
CIVIL APPEAL NO. 3393 OF 2011
CIVIL APPEAL NO. 3394 OF 2011
CIVIL APPEAL NO. 3395 OF 2011
J U D G M E N T
PAMIDIGHANTAM SRI NARASIMHA, J.
1. The issue for consideration is whether the state of Rajasthan
has the power and jurisdiction to levy and collect stamp duty on
policies of insurance issued within the state. For the reasons to
follow, we have rejected the contention of the Life Insurance
Corporation, the appellant herein, regarding the lack of legislative
Signature Not Verified
competence of the state and have also affirmed the power to levy
Digitally signed by
Indu Marwah
Date: 2024.04.30
18:11:47 IST
Reason:
and collect stamp duty under the Rajasthan Stamp Law
1
1
(Adaptation) Act, 1952 and the rules made thereunder. While
dismissing the appeal, we have however set aside certain findings
of the High Court and granted relief to the appellant in the facts
and circumstances of the case. We will first refer to the necessary
facts before analysing the provisions and drawing our conclusions.
2. Facts : The appellant issued various insurance policies within
the state of Rajasthan between 1993-94 and 2001-02. As per the
prevailing law relating to stamp duty, the appellant was required
to affix stamps by paying stamp duty on the policies of insurance
issued by it in accordance with the Indian Stamp Act, 1899, as
adapted to the state of Rajasthan by the 1952 Act.
2.1 On 19.08.1991, the appellant wrote to the Collector, Jaipur
regarding the non-availability of ‘Agents License Fee stamps’. On
07.10.1991, the Treasury Officer, Jaipur replied to the appellant
that ‘India Insurance Stamps’ are the property of the central
government and their supply and distribution is not related to their
department.
2.2 On 15.04.2004 and 06.05.2004, the Inspector General
(Registration and Stamps) Rajasthan, Ajmer issued a letter to the
appellant to deposit a sum of Rs. 1.19 crores for causing loss of
1
Hereinafter ‘1952 Act’.
2
revenue to the state of Rajasthan as it had purchased insurance
stamps between 1993-94 and 2001-02 from the state of
Maharashtra for insurance policies that were issued within the
state of Rajasthan. Pursuantly, the Additional Collector (Stamps),
Jaipur issued a show-cause notice under Section 37(5) of the
2
Rajasthan Stamp Act, 1998 for payment of the amount.
2.3 By order dated 16.09.2004, the Additional Collector
(Stamps), Jaipur confirmed the show-cause notice and directed the
appellant to deposit the amount. It was held that the
correspondence between the appellant and the department
pertained to Agents Fee Stamps and not India Insurance stamps
that are affixed on insurance policies and were available at the
relevant time. Similar orders were passed on 16.10.2004 for Rs.
1.07 crores, 11.10.2004 for Rs. 1.18 crores, 01.11.2004 for Rs.
1.87 crores, and 28.10.2004 for Rs. 43.68 lakhs. The appellant
also challenged these orders by way of separate writ petitions,
3
which have been disposed of in the judgment impugned before us.
2.4 The appellant filed a writ petition challenging the order of the
Additional Collector dated 16.09.2004, which came to be
2
Hereinafter ‘1998 Act’.
3
In D.B. Civil Writ Petition No. 3418/2006, D.B. Civil Writ Petition No. 3419/2006, and D.B.
Civil Writ Petition No. 3420/2006, and D.B. Civil Writ Petition No. 8187/2004, judgment
dated 21.02.2011 (‘impugned judgment’).
3
4
dismissed by the High Court single judge on the ground that the
appellant has an alternative efficacious remedy of filing a revision
under Section 65 of the Rajasthan Stamp Act.
2.5 The appellant preferred a writ appeal before the division
bench, which was initially disposed of by an order dated
11.12.2004 wherein the High Court directed the Chief Secretary of
the Rajasthan government to constitute a High Powered
Committee under his chairmanship to decide the matter by a
reasoned order. It was also held that if either party is dissatisfied
with the decision of the committee, they could file for revival of the
writ appeal. The Committee constituted pursuant to this order
rejected the appellant’s representation, due to which the writ
5
appeal was restored and decided in the impugned judgment .
3. Reasoning of the High Court : It is necessary to briefly discuss
the reasoning of the High Court in dismissing the writ appeal and
confirming the imposition of stamp duty. The High Court relied on
Sections 2, 3(v), and 3A of the 1952 Act read with Rules 2(d)
and 3 of the Rajasthan Stamp Rules, 1955. Section 2 provides that
subject to the other provisions of this Act, the Indian Stamp Act,
4
In S.B. Civil Writ Petition No. 7013 of 2004, judgment dated 08.10.2004.
5
In D.B. Civil Special Appeal (Writ) No. 670/2004, judgment dated 21.02.2011 (‘impugned
judgment).
4
1899 shall apply to the whole state of Rajasthan on and from
01.04.1958. Section 3(v) provides that reference in the Indian Act
to ‘government’ shall, unless the context otherwise requires, be
construed as reference to the state government. Section 3A(1)
provides for payment of stamp duty in cash when stamps are not
available for sale.
3.1 Rule 2(d) of the Rajasthan Stamp Rules, 1955 defines
government as state government and Rule 3 provides for the mode
of payment of stamp duty to the state government.
3.2 Relying on these provisions, specifically Section 3A(1), the
High Court held that the appellant should have paid the stamp
duty in cash and the receipt would be affixed on the instrument as
envisaged under this provision. It was also held that there was no
legal sanction under the scheme of the Act that permits the
appellant to purchase such stamps from outside the state in case
6
of non-availability. It further held that in any case, only Agents
License Fee stamps were unavailable while the imposition of stamp
7
duty was on India Insurance Stamps.
3.3 Relying on Rule 2(d) that defines ‘government’ as meaning
government of Rajasthan and Rule 3 that mandates payment of
6
Impugned judgment, p. 15.
7
ibid.
5
stamp duty to the state government, the High Court held that the
8
stamps must only be purchased from the Rajasthan government.
The only exception provided is under Section 3A when the person
can deposit cash with the government treasury in case of non-
availability of stamps and affix the receipt of challan with the
9
instrument. The 1952 Act and the 1955 Rules do not permit the
appellant to purchase stamps from outside the state that do not
bear the superimposition of the words ‘Rajasthan’ or letters ‘RAJ’
10
as provided in the Explanation to Rule 3. On such reading of the
law and facts, the High Court upheld the order of the Collector
dated 16.09.2004.
4. The High Court also dealt with the arguments by the parties
on the competence of the state government to impose stamp duty
on insurance policies based on the distribution of legislative fields
in the Seventh Schedule on stamp duty. The High Court held that
Entry 91 of List I (Union List) empowers the Parliament to enact a
law relating to rate of stamp duty in respect of various
instruments, including policies of insurance. Entry 44 of List III
(Concurrent List) empowers both the Parliament and state
8
ibid, p.17.
9
ibid.
10
ibid.
6
legislatures to enact laws with respect to “ stamp duties other than
duties or fees collected by means of judicial stamps, but not
including rates of stamp duty ”.
4.1 The High Court held that the 1952 Act has been enacted
under Entry 44, List III and has received Presidential assent. It
does not occupy the field covered by Entry 91 of List I as it does
not fix or prescribe the rate of duty for insurance stamps but only
provides for the collection of stamp duty. The High Court hence
rejected the submission by the appellant that the state government
does not have the power to demand payment for insurance stamps
as they fall under the Union List.
4.2 It also rejected the appellant’s reliance on this Court’s
11
judgment in VVS Rama Sharma v. State of Uttar Pradesh by
differentiating it as in that case, there was no state law that had
received Presidential assent and instead the consideration was
12
under Rule 115A of the UP Stamp Rules, 1942. Since the 1952
Act had received Presidential assent, it was held to be a special law
that has overriding effect, which was not the case in VVS Rama
Sharma (supra) where the Indian Stamp Act read with rules framed
11
(2009) 7 SCC 234.
12
Impugned judgment, p. 19.
7
13
by the state of UP was applicable. It also differentiated the case
on facts as VVS Rama Sharma (supra) pertained to the commission
of criminal offences under the Indian Penal Code and the Indian
14
Stamp Act, 1899.
5. Submissions by the appellant : The learned ASG, Mr. N.
Venkataraman, appeared on behalf of the appellant and has made
two primary arguments. The gist of his submission is: First , that
on the basis of Entry 91 of List I, Entry 63 of List II, and Entry 44
of List III, the state of Rajasthan does not have the legislative
competence to impose and collect stamp duty on insurance
policies as the same falls under the Union List. Second , that the
show-cause notice and the proceedings are under the 1998 Act,
which does not provide for imposition of stamp duty by the state
on policies of insurance. Alternatively, even if the 1952 Act applies,
the appellant had no option but to purchase the stamps from
Maharashtra due to their admitted unavailability and in view of
Section 3A(4) of the 1952 Act. The detailed arguments are as
follows:
5.1 Learned ASG has relied on Entry 47 of List I on insurance
and Entry 91 of List I that empowers the Parliament to prescribe
13
ibid, p. 20.
14
ibid.
8
the rate of stamp duty in respect of bills of exchange, cheques,
promissory notes, bills of lading, letters of credit, policies of
insurance , transfer of shares, debentures, proxies and receipts. He
has argued that since insurance falls under the Union list and
more specifically, since only the Union can prescribe the rate of
stamp duty on insurance policies, the state government cannot
demand that the stamp duty on insurance policies must
necessarily be paid to it and that the stamps cannot be purchased
from other states. He relied on VVS Rama Sharma (supra) on the
point that a state cannot require that insurance stamps, which are
property of the central government, must be purchased only from
that particular state when the insurance policy is issued within its
territory. Challenging the imposition of stamp duty by the state
government, the learned ASG has further submitted that a levy of
stamp duty is in the nature of tax and that there is no valid
imposition of tax unless there is a rate of taxation. Relying on
15
Govind Saran Ganga Saran v. Commissioner of Sales Tax and
16
Mathuram Agrawal v. State of Madhya Pradesh , he has
submitted that the rate of stamp duty must be clearly and
unambiguously ascertainable, without which there is no valid tax
15
1985 Supp SCC 205, para 6.
16
(1999) 8 SCC 667, para 12.
9
law. Since the state does not have the domain competence to
prescribe the rate of stamp duty in the present case, it cannot
validly impose and demand the payment of such duty. Lastly, the
learned ASG has argued that Entry 44 of List III is not in the nature
of a taxation entry by relying on State of West Bengal v. Kesoram
17 18
Industries and State of Karnataka v. State of Meghalaya . He
submits that it is well-settled in taxation law that entries
pertaining to taxation are clearly demarcated between the Union
List and the State List. There is no head of taxation in the
Concurrent List. Hence, the state government cannot impose
stamp duty on the appellant by claiming legislative competence
under Entry 44 of List III.
5.2 Apart from arguing that levy of stamp duty by the state is
contrary to the constitutional scheme, the learned ASG has also
argued that stamp duty cannot be imposed in the present case
under the specific state enactments. He has argued that the 1998
Act applies in the present case as the notice for recovery has been
issued under Section 37(5) of the 1998 Act. Section 3 of the 1998
Act is the charging provision that provides that instruments shall
be chargeable with duty of the amount indicated in the Schedule.
17
(2004) 10 SCC 201.
18
(2023) 4 SCC 416, para 92.
10
By comparing entry 47 of Schedule I of the Indian Stamp Act, 1899
(which provides the rates of stamp duty for various kinds of
policies of insurance) and the Schedule under the 1998 Act, he has
argued that there is no parallel entry in the Schedule of the 1998
Act that provides the rate of stamp duty on insurance policies.
Since Section 3 only provides for imposition of stamp duty as per
rates prescribed in the Schedule and there is no such rate of duty
indicated, the state government cannot demand stamp duty from
the appellant on insurance policies. Alternatively, the learned ASG
has argued that even if the 1952 Act applies, as considered by the
High Court in the impugned judgment, the stamp duty could not
have been paid to the Rajasthan government in the present case
due to the admitted unavailability of India Insurance stamps with
the treasury. Relying on the letter from the department dated
07.10.1991, he argued that the High Court erred in holding that
only Agents License Fee stamps were unavailable when the letter
clearly mentioned India Insurance stamps. Further, the letter also
stated that these stamps are central government property and
their supply and sale is not related to the state government.
Relying on this letter by the department, the learned ASG has
submitted that the government could not have then demanded
11
payment of stamp duty in 2004. Lastly, he has argued that the
High Court’s reliance on Section 3A to hold that the duty could
have been paid in cash in case of unavailability of stamps is
misplaced as sub-clause (4) of Section 3A clearly stipulates that
the provision does not apply to payment of stamp duty chargeable
on instruments specified in Entry 91 of List I. Since insurance
policies are an instrument that fall under this entry, Section 3A
does not apply to it and the appellant could not have paid the
stamp duty in cash. The High Court erred in its conclusion as it
had entirely failed to consider this sub-clause. A similar provision
is also contained in Section 4(4) of the 1998 Act. Hence, he
concluded that there was no way for the appellant to have paid
stamp duty to the Rajasthan government and they had to purchase
the stamps from outside the state as non-payment of duty would
lead to evasion and an unstamped insurance policy would not be
admissible in evidence.
6. Submissions by the respondent : Dr. Manish Singhvi, learned
senior counsel for the state, has argued that the state has the
power to impose and collect stamp duty on insurance policies
under Entry 44 of List III. He has argued that while the power to
prescribe the rate of such duty falls within the exclusive domain of
12
the Parliament, the power to collect and impose the duty and to
frame a charging provision lies with the Parliament and the state
legislatures under Entry 44 of the Concurrent List, which is a sui
generis provision. The legislative competence of the states extends
to collecting stamp duty on instruments specified in Entry 91 of
List I but does not extend to prescribing the rate of duty for such
instruments. The power to prescribe the rate of stamp duty is
clearly demarcated between the Union and the states through
Entry 91 of List I and Entry 63 of List II. The state government can
impose the duty at such rate that is prescribed by the Parliament.
He has also argued that Entry 44 of List III is a taxation provision,
as has been clearly held in Bar Council of Uttar Pradesh v. State of
19
Uttar Pradesh .
6.1 Dr. Manish Singhvi further submits that the 1952 Act applies
since the period of levy is for policies issued between 1993-94 to
2001-02, which is prior to the 1998 Act coming into force (on
27.05.2004). The 1952 Act received Presidential assent and hence
prevailed over the Indian Stamp Act, 1899 in the state as per
Article 254(2). Section 3(vi) of this Act adopts the Schedule from
the central Act for the purpose of rate of stamp duty. Hence, the
19
(1973) 1 SCC 261.
13
stamp duty must be paid to the state government for insurance
transactions occurring within the territory of the state after the
1952 Act came into force as per the rate prescribed in entry 47 of
Schedule I of the Indian Stamp Act. Alternatively, he has argued
that even if the 1998 Act applies, Sections 90 and 91 of that Act
have the effect of adopting the Indian Stamp Act with respect to
instruments contained in Entry 91 of List I. Lastly, he has
differentiated the present case from VVS Rama Sharma (supra) as
that case pertained to the registration of a criminal case against
the officers of LIC for non-payment of stamp duty and the lack of
criminal intent, leading to the quashing of FIR.
7. Issues : Having heard the learned ASG for the appellant and
Dr. Manish Singhvi for the respondent, the following issues arise
for our consideration:
I. Whether the 1952 Act or the 1998 Act applies to the facts
of the present case?
II. Whether the state government has the legislative
competence to impose and collect stamp duty on policies
of insurance as per Entry 91 of List I read with Entry 44 of
List III?
14
III. Whether the 1952 Act requires the purchase of insurance
stamps from and payment of stamp duty to the Rajasthan
government for insurance policies issued within the state?
IV. Whether, in the facts of the present case, the appellant is
liable to pay stamp duty?
I. Applicable Law
8. It is first important to determine whether stamp duty in the
present case can be imposed under the 1952 Act or the 1998 Act.
The High Court has relied on the provisions of the 1952 Act while
arriving at its conclusion. We agree with the High Court on this
aspect as the stamp duty must be levied as per the law in force as
20
on the date of execution of the instrument. In the present case,
the insurance policies were issued between 1993-94 to 2001-02.
21
Section 3 of the 1998 Act , which is the charging provision,
imposes stamp duty on every instrument mentioned in the
Schedule that is executed in the state on or after the date of
20
Vijay v. Union of India , 2023 SCC OnLine SC 1585, 2023 INSC 1030, para 11.
21
The relevant portion of Section 3 of the 1998 Act reads:
“ 3. Instrument chargeable with duty.— Subject to the provisions of this Act and
the exemptions contained in the Schedule, the following instruments shall be
chargeable with duty of the amount indicated in the Schedule as the proper duty
therefor respectively, that is to say,—
(a) every instrument mentioned in that Schedule, which, not having been previously
executed by any person, is executed in the State on or after the date of
commencement of this Act;
(b) every instrument mentioned in that Schedule, which, not having been previously
executed by any person, is executed out of the State on or after the said date, relates
to any matter or thing done or to be done in the State and is received in the State,
or relates to any property situate in the State.”
15
commencement of the Act. The 1998 Act came into force only on
27.05.2004 by way of a notification. Hence, at the time that the
relevant instruments were executed, the 1952 Act was still in force
and the stamp duty is leviable under the same.
II. Legislative Competence
9. The learned ASG has forcefully contended that the state does
not have the power to collect and levy stamp duty on insurance
policies under the state enactment as only the Union can prescribe
the rate of stamp duty for such instruments. He has taken us
through the constitutional scheme on the fields of legislation under
the Seventh Schedule on matters of stamp duty. The relevant
entries are Entry 91 of List I, Entry 63 of List II, and Entry 44 of
List III, which have been extracted here for reference:
Entry 91 of List I :
“ 91. Rates of stamp duty in respect of bills of exchange, cheques,
promissory notes, bills of lading, letters of credit, policies of
insurance, transfer of shares, debentures, proxies and receipts. ”
Entry 63 of List II
:
“ 63. Rates of stamp duty in respect of documents other than those
specified in the provisions of List I with regard to rates of stamp duty. ”
Entry 44 of List III :
“ 44. Stamp duties other than duties or fees collected by means of
judicial stamps, but not including rates of stamp duty. ”
16
10. Article 246 of the Constitution states that the Parliament has
the exclusive power to make laws with respect to any matter in
List I, the Parliament and the legislatures of any state have the
power to make laws with respect to any matter in List III, and the
legislature of any state has the exclusive power to make laws for
such state or any part thereof with respect to any matter in
22
List II.
11. Reading the relevant entries of the Seventh Schedule in the
context of Article 246, the distribution of legislative competence
with respect to legislation on stamp duty is as follows. The
Parliament has the exclusive power to legislate on the rate of stamp
duty with respect to certain instruments, namely: bills of
exchange, cheques, promissory notes, bills of lading, letters of
credit, policies of insurance , transfer of shares, debentures, proxies
and receipts, under Entry 91 of List I. As per Entry 63 of List II,
22
Article 246 reads:
“ 246. Subject-matter of laws made by Parliament and by the Legislatures
of States. —(1) Notwithstanding anything in clauses (2) and (3), Parliament has
exclusive power to make laws with respect to any of the matters enumerated in List
I in the Seventh Schedule (in this Constitution referred to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1),
the Legislature of any State also, have power to make laws with respect to any of
the matters enumerated in List III in the Seventh Schedule (in this Constitution
referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power
to make laws for such State or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this Constitution referred to as the
“State List”).
(4) Parliament has power to make laws with respect to any matter for any part of
2
[in a State] notwithstanding that such matter is
the territory of India not included
a matter enumerated in the State List. ”
17
the legislatures of the states have the exclusive power to legislate
on the rate of stamp duty with respect to documents other than
those specified in Entry 91 of List I for their state or any part of
their state. In other words, there is a distribution of instruments
between the Parliament and the state legislatures as regards the
legislative competence to fix rates of stamp duty. However, as per
Entry 44 of List III, the Parliament and the legislatures of the states
have concurrent powers to legislate on stamp duties (other than
duties or fees collected by means of judicial stamps), but not
including rates of stamp duty.
12. A combined reading of the constitutional scheme shows that
the power to prescribe the rate of duty is mutually exclusive and
has been clearly demarcated between the Parliament and the
23
Insurance policies, which are the
legislatures of the state.
relevant instrument for the purpose of the present case, fall under
Entry 91 of List I for the purpose of prescription of rate of duty.
This means that only the Parliament holds the exclusive power and
the legislative competence under the Constitution to prescribe the
rate of stamp duty on insurance policies. There is no dispute
regarding this point.
23
VVS Rama Sharma (supra), paras 14-15.
18
13. The issue however that falls for our consideration is whether
the state government can enact a law that imposes stamp duty on
insurance policies by using the rate prescribed by the Parliament
by sourcing legislative competence through Entry 44 of List III.
14. This Court in VVS Rama Sharma (supra) has answered this
question in the affirmative and has held that under Entry 44 of
List III, “ the power to levy stamp duty on all documents, is
concurrent. But the power to prescribe the rate of such levy is
excluded from Entry 44 of List III and is divided between Parliament
24
and the State Legislatures .” Therefore, the charging provision for
imposition of stamp duty, even on documents contained in Entry
91 of List I, can be enacted by both the Parliament and the state
25
legislatures, subject to the provisions of Article 254. These
principles have been summarised in VVS Rama Sharma (supra) as
follows:
“ 23. As mentioned earlier, under Entry 44 of List III, the power to levy
stamp duty on all documents is concurrent. But the power to prescribe
the rate of such levy is excluded from Entry 44 of List III and is divided
between Parliament and the State Legislatures. If the instrument falls
under the categories mentioned in Entry 91 of List I, the power to
prescribe the rate will belong to Parliament, and for all other
instruments or documents, the power to prescribe the rate belongs to
the State Legislature under Entry 63 of List II. Therefore, the meaning
of Entry 44 of List III is that excluding the power to prescribe the rate,
the charging provisions of a law relating to stamp duty can be made
both by the Union and the State Legislature, in the concurrent sphere,
24
ibid, para 14.
25
ibid, para 15.
19
subject to Article 254 in case of repugnancy. So, in the case at hand,
it is Entry 91 of List I of the Seventh Schedule which would be
applicable and the States do not have the power to circumvent a
Central law. ”
26
15. In a recent judgment in Vijay v. Union of India , this Court
the power to levy stamp duty on all documents
has again held that
is concurrent under Entry 44 of List III. Only the power to prescribe
the rate of such duty is with the Parliament, and subject to Entry
27
91 of List I, with the state legislatures.
16. From the above precedents, it is clear that the state of
Rajasthan has the power to impose and collect stamp duty on
insurance policies under Entry 44 of List III, albeit such duty must
be imposed as per the rate prescribed by a Parliamentary
legislation under Entry 91 of List I.
17. In view of the above explanation, the issue relating to
legislative competence raised by the learned ASG conclusively
ends. However, the learned ASG has raised additional arguments
regarding the requirements of a valid tax law and on whether Entry
44 of List III is a taxation entry. Although we find these
submissions to be unnecessary, we will deal with them as they
have been raised.
26
2023 SCC Online SC 1585, 2023 INSC 1030.
27
ibid, para 12.
20
18. Relying on this Court’s decisions in Govind Saran Ganga
Saran (supra) and Mathuram Agarwal (supra), the learned ASG has
argued that the rate of taxation is an essential component for a
valid imposition of tax. Since the state legislature cannot prescribe
the rate of stamp duty on insurance policies, he has argued that
there can be no valid imposition of stamp duty on these
instruments by way of a state enactment. This argument must be
rejected in view of the above conclusion that even if the state
legislature cannot prescribe the rate of stamp duty, it can levy such
duty at the rate as provided by the Parliament. Both the decisions
relied on by the learned ASG pertain to cases where the charging
provision was ambiguous in defining an essential component of a
valid tax law, i.e., the subject of the tax, the person who is liable
28
. In the
to pay the tax, and the rate at which the tax is to be paid
present case, while it is certainly true that the state cannot
prescribe the rate of duty on insurance policies, that by itself does
not mean that there is ambiguity or lack of clarity regarding the
rate of such duty. Rather, the rate of duty is unambiguous, clear,
and defined by the Parliament and is adopted by the state to levy
and collect stamp duty. Hence, this submission must be rejected.
28
Mathuram Agarwal (supra), para 6.
21
19. The other submission by the learned ASG that there is no
taxation entry in the Concurrent List is based on this Court’s
decisions in Kesoram Industries (supra) and State of Karnataka v.
State of Meghalaya (supra). The learned ASG has pointed us to
relevant portions of these judgments. However, it must be noted
that these judgments pertain to taxation entries, rather than to
entries on stamp duty. While stamp duty is certainly in the nature
29
of a tax, it has not been specifically considered by this Court in
these judgments. A three-judge bench of this Court in Bar Council
of Uttar Pradesh v. State of UP (supra) held that payment of stamp
duty pertains to the domain of taxation and the imposition of such
30
duty falls in pith and substance under Entry 44 of List III. This
judgment came prior to the decisions relied on by the learned ASG
but has not been considered by the Court in those cases as they
did not pertain to stamp duty. Hence, it is clear that Entry 44 of
List III is a taxation entry that falls under the Concurrent List and
this submission must also be rejected. We hold that the state
legislature has the legislative competence to impose and collect
stamp duty on policies of insurance under Entry 44 of List III, as
per the rate prescribed by the Parliament under Entry 91 of List I.
29
Government of Andhra Pradesh v. P. Laxmi Devi
, (2008) 4 SCC 720, para 19.
30
Bar Council of Uttar Pradesh (supra), para 14.
22
III. Liability to Pay Stamp Duty Under the 1952 Act:
20. Provisions and Imposition of Stamp Duty Under the 1952 Act :
Section 2 of the 1952 Act reads as follows:
“ 2. Application of Indian Act.– Subject to the other provisions of
this Act, the Indian Stamp Act, 1899 (II of 1899) of the Central
Legislature as amended from time to time, hereinafter referred to as
the Indian Act shall apply to the whole of the State of Rajasthan on
st
and from the 1 day of April, 1958. ”
(emphasis supplied)
21. Section 2 of the 1952 Act adopts the Indian Stamp Act, 1899
and makes it applicable to the state of Rajasthan subject to certain
adaptations that are contained in Section 3. Sections 3(v) and 3(vi)
are relevant for our purpose, and are as follows:
“ For the purposes of section 2,–
3. Adaptations.–
(v) references in the Indian Act to any Government shall, unless the
context otherwise requires, be construed as references to the State
Government, that is to say, to the Government of the State of
Rajasthan as formed by section 10 of the States Re-organisation Act,
1956 (Central Act 37 of 1956):
Provided that in clause (i) of section 3 of the Indian Act, the word
“Government” wherever occurring shall mean the State Government
as well as the Central Government .
(vi) references in the Indian Act to Schedule I shall be construed as
references to the Second Schedule of the Rajasthan Stamp Law
(Adaptation) Act, 1952 (Rajasthan Act VII of 1952) ”
22. Further, Rules 2(d) and 3 of the Rajasthan Stamp Rules,
1955 read as follows:
“ 2(d) “Government” means the Government of the State of Rajasthan ”
“ 3. Mode of payment of duty-Except as otherwise provided by the Act,
or by these rules, -
23
(1) all duties with which any instrument is chargeable shall be paid,
and such payment shall be indicated on such instruments, by means
of stamps issued by the Government for the purpose of the Act and
these Rules; and
(2) a stamp which by any word or words on the face of it is
appropriated to any particular kind of instrument shall not be used
for any instrument of any other kind.
Explanation: - For the purpose of clause (1), a stamp of the central
Government or of the Government of any covenanting State shall be
deemed to have been superimposed with word “Rajasthan” or with
the letters “RAJ”. ”
Rule 3, read with Rule 2(d), provides that the stamps issued by the
state government will indicate the payment of stamp duty that is
chargeable on an instrument. Therefore, the stamp must be issued
by and the stamp duty must be paid to the state government for
31
an instrument to be ‘duly stamped’ under the 1952 Act.
23. Pursuant to the adaptations by the 1952 Act, the relevant
portion of Section 3 and Schedule I of the Indian Stamp Act, 1899
as adapted to the state of Rajasthan by the 1952 Act is as follows:
“ —Subject to the provisions
3. Instruments chargeable with duty.
of this Act and the exemptions contained in Schedule I, the following
instruments shall be chargeable with duty of the amount indicated in
that Schedule as the proper duty therefore respectively, that is to
say—
(a) every instrument mentioned in that Schedule which, not having
been previously executed by any person, is executed in India on or
after the day on which the Act comes into force in the State of
Rajasthan;
31
Section 2(11) of the Indian Stamp Act, 1899 as adapted to the state of Rajasthan reads:
“ 2. Definitions . — In this Act, unless there is something repugnant in the subject
or context, —
(11) “Duly stamped”. — “duly stamped”, as applied to an instrument, means that
the instrument bears an adhesive or impressed stamp of not less than the proper
amount and that such stamp has been affixed or used in accordance with the law
for the time being in force in India ”
24
(b) every bill of exchange payable otherwise than on demand, or
promissory note drawn or made out of India on or after that day and
accepted or paid or presented for acceptance or payment, or
endorsed, transferred or otherwise negotiated, in India; and
(c) every instrument (other than a bill of exchange or promissory note)
mentioned in that Schedule, which, not having been previously
executed by any person, is executed out of India on or after that day,
relates to any property situate, or to any matter or thing done or to be
done, in India and is received in India: ”
Schedule I of the central Act, as adapted to the state of Rajasthan,
reads as follows:
“ SCHEDULE I
Stamp Duty on Instruments
(See section 3)
[In this Schedule, given under the Indian Stamp Act, 1899, only those
articles are reproduced for which no specific provision is made in the
Rajasthan Amending Act, No. 7 of 1952.]
*
47. Policy of insurance–
D- LIFE INSURANCE OR GROUP
INSURANCE OR OTHER INSURANCE NOT
SPECIFICALLY PROVIDED FOR, except
such a RE-INSURANCE , as is described in
Division E of this article—
| If drawn<br>singly | If drawn in<br>duplicate for<br>each part. |
|---|---|
| Ten paise. | Five paise. |
| Ten paise. | Five paise. |
| Twenty paise. | Ten paise. |
(i) for every sum insured not
exceeding Rs. 250;
(ii) for every sum insured exceeding
Rs. 250 but not exceeding Rs. 500;
(iii) for every sum insured exceeding
Rs. 500 but not exceeding Rs.
1,000 and also for every Rs.
1,000/- or part thereof in excess of
Rs. 1,000.
25
which stamp-duty has been
paid, the proper stamp must
be borne on the excess sum
so insured.
Exemption
Policies of life-insurance granted by the
Director-General of Post Offices in
accordance with rules for Postal Life-
Insurance issued under the authority of the
Central Government
24. From reading the above provisions, rules, and the Schedule
together, it can be seen that Section 2 of the 1952 Act provides
that the Indian Stamp Act, 1899 will apply in the state of
Rajasthan subject to certain adaptations. The relevant adaptations
for our purpose are that ‘government’ shall refer to state
government (as per Section 3(v) of the 1952 Act) and that reference
to Schedule I of the central Act shall be construed as reference to
the Second Schedule of the 1952 Act (as per Section 3(vi) of the
1952 Act). The Second Schedule of the 1952 Act prescribes the
rates of stamp duty on certain instruments. However, since
policies of insurance are specified in Entry 91 of List I, only the
Parliament has the legislative competence to prescribe the rate of
stamp duty to be imposed on them. Consequently, the Second
Schedule to the 1952 Act does not contain any entry on rates of
duty for policies of insurance, and rightly so. Rather, when we read
Entry 47(D) of Schedule I of the Indian Stamp Act, 1899 as adapted
26
to the state of Rajasthan, we see that the rate that has been
prescribed under the central law has been adopted within the state
as well.
25. The power to levy and collect stamp duty is relatable to the
legislative competence of the state, followed by clear authority of
law through statutory prescription. Having recognised the
legislative competence of the state of Rajasthan, the state has the
power to collect stamp duty under Section 3 of the Indian Stamp
Act, 1899 as adapted to the state of Rajasthan that provides that
an instrument shall be chargeable with the duty of the amount
indicated in the Schedule if it is executed within the state of
Rajasthan.
26. The mandate of Section 3 is also found in Rule 3 of the
mode of payment
Rajasthan Stamp Rules, 1955 that provides for “ ”.
Rule 3, read with Rule 2(d), provides that the duty with which any
instrument is chargeable shall be paid by means of a stamp issued
by the state government. The relevant event flowing from Section
3 and Rule 3 authorising the levy and imposition of stamp duty is
the execution of the policy of insurance within the state. The
liability to purchase the stamps from the state of Rajasthan is
therefore clear and unambiguous. Consequently, for instruments
27
executed within the state, the purchase of stamps from outside the
state will equate to evasion of stamp duty and the instrument will
not be ‘duly stamped’.
27. Differentiating VVS Rama Sharma (supra): The learned ASG
has placed reliance on the following portions of VVS Rama Sharma
(supra) to contend that the state government cannot demand that
insurance stamps must only be purchased from it for policies
issued within the state:
“ 29. In the case at hand, it has been stated in the FIR that the
Divisional Office of LIC, Varanasi has not purchased the insurance
stamps from the Treasury Office of U.P. but the same were purchased
from the stamp vendors, outside of State, which caused loss to the
State exchequer to the tune of Rs 1,67,21,520.00 to the State
Government. So, the sole allegation against the appellants is that they
have purchased the insurance stamps from outside the State of U.P.
However, as we have already noted that the said act of the appellants
cannot be said to be inconsistent with any provisions of the Stamp
Act or any other rules. So, the allegation made in the FIR even if
proved by the prosecution does not constitute any offence.
32. It is wholly immaterial whether the appellants are purchasing the
insurance stamps from the State of U.P. or from any other State. In
fact, as mentioned earlier, Rule 115-A of the U.P. Stamp Rules itself
declares that “Stamps which are the property of the Central
Government”. That being the legal position, it is legally untenable to
contend that the insurance stamps must be purchased from the State
of U.P. only. ”
(emphasis supplied)
28. These portions of the judgment must be seen in the context
of the facts and the law applicable in that case. While arriving at
its conclusion, this Court in VVS Rama Sharma (supra)
28
32
interpretated Rule 115A of the UP Stamp Rules, 1942 (these
Rules were framed by the state government pursuant to rule-
making powers given to states under Sections 74 and 75 of the
33
Indian Stamp Act, 1899 ) read with the provisions of the Indian
34
Stamp Act, 1899. It was held that since the Stamp Rules have
been framed under the central Act, their scope is only to the extent
provided in Sections 74 and 75 and they cannot circumvent the
35
provisions of the central Act. In these facts, this Court held that
the State of UP could not require that stamps on insurance policies
must only be purchased within the state and cannot be validly
purchased from other states.
32
VVS Rama Sharma
Rule 115A of the UP Stamp Rules, 1942 has been extracted in (supra),
para 20 that reads as follows:
“20. Further, Rule 115-A of the Stamp Rules provides for the mode of sale of such
stamps. It reads as follows:
“115-A. Stamps which are the property of the Central Government and which are
required to be sold to the public through post offices e.g. Central excise revenue
stamps, defence (or national) savings stamps, shall be obtained by post offices from
local and branch depots and sold to the public in the same manner as ordinary
postage stamps.
Tobacco excise duty labels and insurance agent licence fee stamps shall be sold to
the public at local and branch depots at which they are stocked.”
33
Sections 74 and 75 of the Indian Stamp Act, 1899 read as follows:
“ 74. Powers to make rules relating to sale of stamps. –– The State Government
may make rules for regulating–(a) the supply and sale of stamps an stamped
papers,
(b) the persons by whom alone such sale is to be conducted, and
(c) the duties and remuneration of such persons:
Provided that such rules shall not restrict the sale of ten naye paise or five naya
paise adhesive stamps.
75. Power to make rules generally to carry out Act. –– The State Government
may make rules to carry out generally the purposes of this Act, and may by such
rules prescribe the fines, which shall in no case exceed five hundred rupees, to be
incurred on breach thereof.”
34
VVS Rama Sharma
(supra), paras 18-23.
35
ibid.
29
29. The law under consideration in the facts of the present case
is different. In the present case, the imposition of stamp duty by
the state government is under the 1952 Act, which is a state law
that has been enacted under Entry 44 of List III, and has received
36
Presidential assent as contemplated under Article 254. Article
254(2) clearly stipulates that when a state law with respect to a
matter in the Concurrent List is repugnant to the provisions of an
earlier law made by the Parliament or an existing law with respect
to that matter, then the law passed by the state shall prevail in
that state “ if it has been reserved for the consideration of the
President and has received his assent ”. The 1952 Act that occupies
the field in the present case has undisputedly received Presidential
36
Article 254 of the Constitution reads as follows:
“ 254. Inconsistency between laws made by Parliament and laws made by
(1) If any provision of a law made by the Legislature
the Legislatures of States.—
of a State is repugnant to any provision of a law made by Parliament which
Parliament is competent to enact, or to any provision of an existing law with respect
to one of the matters enumerated in the Concurrent List, then, subject to the
provisions of clause (2), the law made by Parliament, whether passed before or
after the law made by the Legislature of such State, or, as the case may be, the
existing law, shall prevail and the law made by the Legislature of the State shall,
to the extent of the repugnancy, be void.
(2) Where a law made by the Legislature of a State with respect to one of the matters
enumerated in the Concurrent List contains any provision repugnant to the
provisions of an earlier law made by Parliament or an existing law with respect to
that matter, then, the law so made by the Legislature of such State shall, if it has
been reserved for the consideration of the President and has received his assent,
prevail in that State:
Provided that nothing in this clause shall prevent Parliament from enacting at any
time any law with respect to the same matter including a law adding to, amending,
varying or repealing the law so made by the Legislature of the State. ”
30
assent and hence it prevails over the Indian Stamp Act, 1899 so
37
far as the state of Rajasthan is concerned.
30. This Court in VVS Rama Sharma (supra) did not consider any
such law enacted by the state legislature that received Presidential
assent and was applicable within the state over the central Act.
38 39
Further, a stamp duty is a tax, and hence under Article 265 ,
40
its levy and collection must be by the ‘authority of law’ . In VVS
Rama Sharma (supra), there was no charging provision that was
considered by the Court that required the payment of stamp duty
on insurance policies to the government of UP. Rather, the case
was concerned with the interpretation of Rules framed by the state
under the central Act. Hence, the final conclusion in that case is
differentiable on facts and law from the present case.
31. Conclusions on this issue : We have undertaken a detailed
analysis of the provisions of the 1952 Act and the Rajasthan Stamp
Rules, 1955 that impose stamp duty on insurance policies issued
by the appellant within the state. Section 3 of Indian Stamp Act,
37
UP Electric Supply Co Ltd v. R.K. Shukla , (1969) 2 SCC 400, para 9; M . Karunanidhi v. Union
of India , (1979) 3 SCC 431, paras 7-8.
38
Government of Andhra Pradesh v. P. Laxmi Devi (supra), para 19.
39
Article 265 reads as follows:
“ 265. Taxes not to be imposed save by authority of law.— No tax shall be
levied or collected except by authority of law. ”
40
Balaji v. ITO Municipal Council, Kota, Rajasthan v. Delhi Cloth and
, AIR 1962 SC 123;
General Mills Co. Ltd, Delhi , (2001) 3 SCC 654.
31
1899 as adapted to the state of Rajasthan is the charging provision
as per which the appellant must pay stamp duty to the state
government on insurance policies executed within the state. The
rate at which stamp duty is payable on policies of insurance under
the 1952 Act has been adopted from Schedule I of the central Act,
in accordance with Entry 91 of List I. The charging provision has
thus been validly enacted by the state government under Entry 44
of List III. Therefore, the state government in the present case can
impose stamp duty on the issuance of insurance policies within its
territory and require the payment of such stamp duty by the
appellant. Under these circumstances, the commencement of
proceedings for recovery of stamp duty under the state law and the
rules made thereunder is legal, valid, and justified.
IV. Liability of the Appellant in the Facts of the Present Case:
32. The learned ASG has relied on the letter by the Treasury
Officer, Jaipur dated 07.10.1991, the contents of which have been
extracted hereinunder:
“ In reference to above it is to submit that Government of India
Insurance Stamp is the property of Central Government, whose
supply and distribution is not related with this Department. ”
33. From the contents of the letter, it is clear that the department
has admitted the non-availability of India Insurance stamps and
32
has also stated that it is not concerned with their supply and
distribution as they are the property of the central government.
The appellant submits that due to such representation by the
respondent-government, they were compelled to purchase the
stamps from Maharashtra, without which they could not have
issued the insurance policies in the state of Rajasthan. The High
Court, in the impugned judgment, has held that the
correspondence of the appellant with the department pertained to
41
Agents License Fee stamps. However, it has evidently not taken
note of the letter dated 07.10.1991 while arriving at such finding.
The High Court has therefore erred in this regard.
34. Further, the High Court has held that even if the stamps were
unavailable, the appellant was duty-bound to pay the stamp duty
to the state government in cash as provided under Section 3A(1) of
42
the 1952 Act. The relevant portions of Section 3A have been
extracted:
“ .— (1) Where the State
3A. Payment of stamp duty in cash
Government or the Collector under instructions of the State
Government, by order published in the Official Gazette, declares that
adhesive or impressed stamps of any denomination are not in stock
for sale in sufficient quantity; then, notwithstanding anything
contained in this Act or the rules made thereunder and during the
period the said order remains in force,—
(i) any instrument chargeable with the stamp duty under this Act may
be executed on an unstamped paper;
41
Impugned judgment, p. 15.
42
Impugned judgment, p. 15.
33
(ii) the stamp duty chargeable on such instrument under this Act may
be paid to or collected by any Government treasury in cash and a
receipt or challan therefor shall be duly given by the officer receiving
the cash;
(iii) the officer-in-charge of the Government treasury shall, as soon as
may be, after the stamp duty chargeable on any such instrument
under this Act has been received in cash, make on the instrument for
which the stamp duty has been paid in cash, the following
endorsement, after due verification that the stamp duty had been
paid in cash for such instrument, and after cancelling such receipt or
challan so that it cannot be used again, namely:-
‘Stamp duty of Rs. ……………………paid in cash, vide receipt/challan
No. …………………….dated…………………
(iv) the instrument endorsed under clause (iii) shall be deemed to be
duly stamped under this Act and may be used or acted upon as such
to all intents and for all purposes;
Explanation.- For the purposes of sub-section (1) "Government
treasury" includes a Government sub-treasury and any other place
as the State Government may by notification in the Official Gazette,
appoint in this behalf.
*
(4) Nothing contained in this section shall apply to the payment of
stamp duty chargeable on the instruments specified in entry 91 of
List I of the Seventh Schedule to the Constitution of India. ”
35. However, the High Court entirely failed to consider sub-
section (4), despite quoting it, which excludes instruments under
Entry 91, List I from the application of Section 3A. Therefore, the
High Court has committed an error in holding that the appellant
could have paid the stamp duty in cash.
36. In view of the above circumstances, the appellant had no
choice but to purchase the insurance stamps from outside the
state. While it made every endeavour to purchase the stamp from
within the state, due to the letter by the department and the lack
of mechanism for payment of stamp duty under the 1952 Act in
case of unavailability of insurance stamps, it was unable to
34
purchase the stamps and pay the stamp duty to the Rajasthan
government.
37. Therefore, having considered the matter in detail, we finally
hold that:
I. The preliminary issue relating to the applicability of the
relevant state law, i.e., the 1952 Act or the 1998 Act, is
answered by holding that the Rajasthan Stamp Law
(Adaption) Act, 1952 applies to the present case.
II. We hold that the state legislature has the legislative
competence to impose and collect stamp duty on policies
of insurance under Entry 44 of List III, as per the rate
prescribed by the Parliament under Entry 91 of List I.
III. We hold that for the execution of insurance policies within
the state of Rajasthan, the appellant is bound to purchase
India Insurance Stamps and pay the stamp duty to the
state of Rajasthan.
IV. While we have upheld the power and jurisdiction of the
state to levy and collect stamp duty on insurance policies,
in the facts and circumstances of the case as indicated
hereinabove, we direct that the state government shall not
demand and collect the stamp duty as per the orders dated
35
16.09.2004, 16.10.2004, 11.10.2004, 01.11.2004, and
28.10.2004.
38. In conclusion, we dismiss the appeals and affirm the
judgment of the High Court dated 21.02.2011 in D.B. Civil Special
Appeal (Writ) No. 670 of 2004, D.B. Civil Writ Petition No. 3418 of
2006, D.B. Civil Writ Petition No. 3419 of 2006, D.B. Civil Writ
Petition No. 3420 of 2006 and D.B. Civil Writ Petition No. 8187 of
2004. We also set aside certain findings of the High Court to the
extent indicated in issue no. IV and direct the State Government
not to demand and collect stamp duty as per the orders dated
16.09.2004, 16.10.2004, 11.10.2004, 01.11.2004, and
28.10.2004.
39. Parties shall bear their own costs.
……………………………….... J.
[PAMIDIGHANTAM SRI NARASIMHA]
……………………………….... J.
[ARAVIND KUMAR]
NEW DELHI;
APRIL 30, 2024.
36