Report No. 67

Chapter 50

Conclusion

50.1. Introductory.-

We have concluded our consideration of the Act, and would now like to say a few words about the recommendations made in this Report.

50.2. Object of recommendations.-

It would be apparent from the contents of the preceding chapters that we have not confined out selves to tidying up a few technical anomalies in the Act. Our recommendations are aimed at improving the substance, form and working of the Act, within the Limitation that we set out in the first Chapter.1

Broadly speaking, the changes which we have recommended seek to achieve the following objects:-

(a) improvement in the tax structure-though to a very limited extent2 (e.g. our recommendation as to powers of attorney).

(b) improvement in the practical working of the Act, by amending provisions that cause difficulty, delay or inconvenience (e.g., our recommendation as to the mode of cancellation of stamps).

(c) improvement in the drafting of the provisions-in particular, removing uncertainty caused by conflicting views.

(d) securing consistency with juristic principles (e.g., our recommendation as to the inclusive portion of the charging article on lease and our recommendation as to liability to bear the duty).

(e) giving proper recognition to sociological considerations relevant to the subject (e.g., our recommendations as to assignment of copyright and insurance policies for accident).

(f) providing for uniform interpretation of the Act within a State by strengthening the procedure for reference (sections 56-57).

(g) avoidance of injustice, hardship or inconvenience to the citizens, in court as well as elsewhere (e.g., our recommendation as to the definition of promissory note, and as to section 35), where the requisite amendment could be made without a serious effect on the revenue.

1. Chapter 1.

2. See Chapter 1.

50.3. International character of instruments.-

As to the question of hardship and convenience we would like to point out that many of the instruments with which the Act is concerned are of an international character. Bills of lading, Bills of Exchange, promissory notes and other documents relating to maritime law or the law merchant are examples. Modern conditions of trade render it desirable that in regard to such instruments, the' law should be simple and easily ascertainable. For the purpose of academic treatment and other purposes, of course, the corpus of the law is divided into compartments. But the businessman does not, when be enters into a particular transaction, view the matter as such.

The international character of maritime law is of peculiar interest. It has been said that1 English maritime law is one part of English law upon which Roman law has had a direct impact. Lord Mansfield took many of the principles of maritime law from the Roman Law. Again, negotiable instruments are essentially international; institutions-which also renders it desirable that, as far as possible, the law relating thereto should be simple rather than complex. The international character of some instruments has a long history. Bottomry bonds seem 10 have been in vogue in Rome at least as early as 530 A.D. because in that year an edict of Justinian restricted the interest on money advanced on such bonds to 12 per cent.2

In the Narratives of Demosthenes, it is stated that about the year 400 B.C. Grecian merchants practised the negotiation, of large loans to finance commercial maritime ventures-a statement for which support is to be found in the writings of Plutarch.3.

In India, there are cases of advances similar to bottomry being made for financing trade as early as 600 B.C.4

It is, therefore, appropriate that in the preamble to the first English enactment relating marine insurance,5 it was stated that "it has been time out of mind a usage among merchants, both of this nation and of foreign nations, when they make any great adventures (specially into remote parts) to give some consideration of money to other persons (which commonly are in no small numbers) to have from them assurance made of their goods merchandise ships and things adventured."

1. Friedmann, Legal Theory (1967), p. 526.

2. Dover Handbook to Marine Insurance, (1957), p. 2.

3. Dover Handbook to Marine Insurance, (1957), p. 3.

4. Dover Handbook to Marine Insurance (1957), p. 3.

5. An Act touching the policies of assurances used amongst merchants (1601), (43 Elizabeth, Chapter 12).

50.4. International trade and India.-

India is no stranger to international trade. Pre-historic remains discovered at several places in India in archaeological excavations show that trade on rivers and oceans was carried on by boats. The Rig Veda refers to the ship wreck of Bhujyu and the subsequent rescue by the Ashwins; these incidents give a definite indication of maritime trade. Later, in the pre-Maurayan and Maurayan periods, such commercial activities seem to have become quite common.1 In fact, when the Roman Empire was as its height, Indo-Roman trade also seen to have attained its climax. This is evident from the historical accounts available in regard to Gupta period, when India's internal and foreign trade reached great heights. In the first century after Christ, India had a favourable balance of trade with Rome.2

The Manu Smriti has an interesting verse which makes boatmen collectively responsible for loss caused by their negligence.3-4

With such a volume and richness of international trade, it is axiomatic that contracts must have been entered into and recorded in writing, even though the writings themselves may not be traceable at the present day.

1. See in general, R.K. Mookerjee Indian Shipping, (Bombay) [2nd Edn. (1957), pp. 37-54].

2. See-

(a) R.K. Mookerji Indian Shipping, (Bombay) (2nd Edn. 1957), pp. 37-54, 57, 62, 70.

(b) M.C. Bandophadhya Economic Life and Progress in Ancient India (Calcutta 1945), Vol. I.

(c) K.A.N. Shastri A History of South India from pre-historic Times to the fall of Vijayanagar (Madras, 1966).

3. Manu 8: 408-409.

4. R.K. Mookerji Indian Shipping, (Bombay), (1957), p. 86, citing Pliny Natural History, Vol. 2.18.

50.4A.. Various aspects.-

We have said enough to indicate that even a taxing statute like the Act with we are concerned involves the consideration of a number of theoretical and practical aspects. The rate structure could bear improvement, the practical working should be remedied where difficulty is caused by the defect in the content of the statute; avoidable uncertainty ought to be attended to; fundamental juristic principles should not be overlooked; sociological considerations may not be totally irrelevant; interpretation of the law ought to be uniform; the kind of audience to which the law is addressed, and the class of citizens who will primarily be called upon to comply with it, as well as the nature of the transactions which will normally fall within its purview, are matters legitimately to be taken into account; above all, a well drafted law, easy of application and not too difficult to understand, would ultimately result in benefit to the State as well as to the citizens.

50.5. Importance not appreciated.-

Unfortunately, some of the aspects which we have outlined above are not properly appreciated. Taxation law is often regarded as a technical branch of the law, not worthy of academic study of capable of being subjected to juristic discussion. The Stamp Act, if we may say so, is the Cinderlla of the law. One hardly finds, except in judicial decisions relating to particular controversies or in official documents dealing with particular problems, studies discussing or exploring the basic principles underlying the taxing provisions of this particular Act. It is appropriate to make this observation in order to explain why, at some places, we have found it necessary to consider the fundamentals of a particular provision and have not limited our discussion to the contours of the relevant problem as they appear on the surface.

50.6. Spirit of the recommendations.-

It is this broad perspective from which we have approached the subject. We would like to record our hope that the Government will view our recommendations in the spirit in which we have made them. At the cost of repetition, we would say that we have approached the task of revising the Act not in a narrow pedantic manner, but from a broader perspective embracing a variety of considerations. Unlike many other taxing measures, the Stamp Act is a self-executing Act, in the sense that it is left to the party chargeable with tax to calculate the duty and then to put the proper stamp according to that calculation. The fact that there is no machinery to oversee the operation of the Act, or to watch how far the citizens have complied with the Act may, to a certain, extent, justify stringent provisions.

But it must, at the same time, be remembered that the very fact that the duty is to be calculated by the 'assessee' throws a very heavy and onerous burden on the Legislature, inasmuch as this part of the task of the citizen is often Difficult. If the legislative scheme is not indicated in clear and precise term in the Act, it becomes still more difficult. It is only occasionally that the citizen faces the authorities entrusted with the enforcement of the Act-the Courts, public officers, the Collector, the Board of Revenue and others. Cases of compliance or non-compliance with the provisions of the Act also come up before the authorities only occasionally. However, whether or not a particular case comes up before the authorities mentioned above, the law always operates and the citizen must decide for himself what, if any, is the amount payable as stamp duty. This renders it desirable that the substance and form of the law and the manner of its implementation should maintain a certain quality.

50.7. Notification.-

In this context, we attach the greatest importance to the easy accessibility of the statutory material. In the course of our study of the Act, we have found that a plethora of notifications has been issued under the Act, particularly under section 9 which confers upon the appropriate Government power to issue reductions and remissions of duty. We are not suggesting any radical change in this power, except the insertion of certain criteria1 in order to preserve the validity of the section against an attack on the ground of excessive delegation of, the legislative power. But we wish to bring it to the notice of the Government mat the ordinary citizen must be finding it difficult, and sometimes impossible, to acquire accurate information about the notifications issued from time to time under this section.

To some extent we are recommending the incorporation of the substance of certain notifications in the concerned articles, but even then a large mass of material contained in the notifications will survive and retain its validity. To us, it appears desirable that some machinery must be devised of making these notifications easily available to the public. No doubt, there is a practice in the Central Government of bringing. out various statutory rules and orders in volumes arranged subject-wise, but the difficulty is that those volumes deal with a large number of subjects in all of which, a particular citizen may not be interested. It will, in our view, be better if a handy volume containing the upto date text of the notifications is also brought out at regular intervals-say, every three years.

The fact that the Stamp Act affects a large number of citizens and not merely those whose cases come up before the courts or whose controversies happen to be reported in the published law reports, becomes material in this context. The inconvenience actually experienced in practice by reason of ambiguity in the statutory materials or their inaccessibility, is very inadequately reflected in the case law that comes to the notice of those whose business it is to advise the Government on the revision of the laws. We are, therefore, attaching the greatest importance to the need for re-publication, in a suitable form, of the notifications and rules made under the Act. Of course, this problem is not peculiar to the Stamp Act. But, at the moment, we are concerned only with that Act.

1. See recommendation as to section 9, supra.

50.8. Constitutional position.-

We are conscious that many of the recommendations which we have made relate to documents other than those mentioned in the Union List. Some of the recommendations touch the rates of stamp duty in regard to documents mentioned in the State List-e.g., our recommendations as to Article 64 (trust). However, we would like to make it clear that we desire that our recommendations should be carried out even where subject-matter of a particular recommendation may, in some respects, fall within the State List. Our intention is that the change recommended will still be useful in regard to Union Territories, as improving and reforming the law in relation to those territories. We are making this observation here, as we have not discussed, under each provision, the constitutional position as to the precise legislative entry applicable to the particular provision under consideration.

50.9. Meaning of "rates".-

At this stage, a discussion of the constitutional position would not be inappropriate. So far as is material, and without entering into details, we may say that under the Constitution one must consult all the three legislative lists in the seventh Schedule for ascertaining the legislative power on the subject. The topic "stamp duties" falls in the concurrent list-but with the very important exception that "rates of stamp duty" do not fall within that entry. As regards rates, the legislative power is partitioned between the Union and the States-it is, again unnecessary to enumerate the documents placed in each list. But the broad scheme is as indicated above. This brings to the forefront the precise scope of the expression "rates of stamp duty".

Although the expression "rates" would, at first sight, seem to be confined to the arithmetical figures of duty, the ensuing discussion will show_that a different view would be better in the particular circumstance of this case.

50.9. Allahabad case as to enrolment of Advocates.-

In the first place, the case law1 shows that the article regarding duty on entry as Advocate is regarded as within State List, entry 63. It was, for example, held in State v. Bar Council, Allahabad, AIR 1971 All 186 (S.N. Dwivedi and C.D. Parekh , JJ.), that section 3(iii) of the U.P. Taxation Laws Amendment Act, amending Article 30 of Schedule IB of the Stamp Act, was prima facie, intra vires the State Legislature, for the subject-matter of this particular enactment lolls within Entry 63 of the State List. It so happened that the Act in that case had received the assent of the President. But that does not affect the position that the subject-matter of the Act was held to fall within the State List. That the Act received Presidential assent was an aspect that was discussed presumably to repel the objection of repugnance to the Advocates Act, 1961.

1. See infra.

50.10. Similarly, in a Mysore Case1, the High Court uphold the of validity of Mysore Act No. 29 of 19622. From the Gazette, it appears that the Act received the assent of the Governor on the twenty-fifth day of September, 1962 and it had not been submitted far the assent of the President. It was held that amended Article 17 of the Mysore Stamp Act was not repugnant to the provisions of section 24 of the Advocates Act, 1961. There was no conflict between the two provisions. The Mysore Act prescribed rate of stamp duty in respect of any entry on the roll of Advocates, the Advocate Act deals with the admission of Advocates on the roll of the State Bar Council. The former was enacted by the State Legislature in pursuance of the legislative power conferred on it under entry 63 of the State List. That field is exclusively reserved for the state Legislature.

The power exercised by Parliament is general legislative power. The power exercised by the State Legislature is a taxing power. The two powers are independent powers and do not collide with each other. Parliament is incompetent to encroach on that field, directly or indirectly. The question of repugnance can only arise in matters where both Parliament and the State Legislatures have legislative competence to pass laws. If any repugnancy arises as a result of encroachment by one legislature over the field reserved for the other, then the rule of ultra vires steps in, and the law enacted by the legislature having no competence becomes void. In such matters there is no question of superior and inferior legislature.

1. B.K. Vittal v. State of Mysore, AIR 1966 Mys 138, paras. 17-18.

2. The Act was first published in the Mysore Gazette on the twenty-fifth day of September 1962.