Stamp-duty valuation follows actual industrial use, despite sale of manufactured goods on the premises.

The appellant executed a gift deed in respect of his share in a multi-storey property used by the family for manufacturing and business activities.

The deed described the property as residential and was stamped on the residential valuation, which was higher than the industrial valuation but lower than the commercial valuation.

The Sub-Registrar inspected the property and treated it as commercial, principally because a showroom named “Sodhi Carpets” operated there and the surrounding Golimar Garden area contained commercial establishments.

The Collector subsequently inspected the premises and found manufacturing activity, treating the property as industrial.

The Rajasthan Tax Board agreed with the Collector after considering both inspection reports and Government Circular No. 2/2004.

The High Court reversed the statutory authorities, holding that industrial use required the property to be situated in an industrial area and used exclusively for manufacturing, without sale of the manufactured goods on the premises.

The appellant challenged that decision before the Supreme Court.

Whether property used for manufacturing activity, with sale of the manufactured goods also taking place on the premises, should be classified as “industrial” or “commercial” for computing stamp duty under the Rajasthan Stamp Act, 1998.

Whether the applicable valuation under Government Circular No. 2/2004 depends on the actual use of the property or on its classification under the Master Plan or its location in an industrial area.

Whether the appellant was entitled to a refund merely because the gift deed had voluntarily been stamped at the higher residential rate rather than the industrial rate.

The Court applied the Rajasthan Stamp Act, 1998, read with Government of Rajasthan Circular No. 2/2004 governing valuation of residential, commercial and industrial properties for stamp-duty purposes.

Under the Circular, land is to be valued at the industrial rate where, at the time of execution of the document, it is being put to industrial use, is situated in a RIICO Industrial Area, or has been converted for industrial purposes; the decisive consideration is the prescribed user, not merely the classification of the area under a Master Plan.

Manufacturing activity does not cease to be industrial merely because the manufactured goods are sold on the premises, including by retail sale.

The property’s registration as a factory under the Factories Act, 1948, and as an industry with the District Industries Centre, Jaipur, are relevant indicators of industrial use.

The Court preferred the physical inspection conducted by the Collector, which established that manufacturing activity was actually carried on in the premises.

The fact that the manufactured goods were also sold there did not transform the property into a commercial property, since sale was ancillary to and connected with the industrial manufacturing activity.

The High Court’s exclusive-manufacturing test and its requirement that the property be located in an industrial area were not supported by Circular No. 2/2004, which focuses on actual industrial use, conversion, or location in a RIICO Industrial Area.

The property’s factory and industry registrations further supported its industrial character.

Accordingly, the statutory authorities correctly treated the property as industrial, notwithstanding its residential description in the gift deed.

It held that actual user, rather than merely the Master Plan classification or location, determines eligibility for the industrial valuation under Circular No. 2/2004.

The High Court’s judgment was set aside, and the orders of the Collector and the Rajasthan Tax Board were restored.

No refund was permitted, despite the gift deed having been stamped at the higher residential rate, because that valuation had been voluntarily adopted by the executant with full knowledge.

The appeal was allowed and pending applications, if any, were disposed of.