Report No. 67

Chapter 9

Mode of Payment-Sections 8 to 10A

9.1. Introductory.-

The mode of payment of duty is the subject matter of the next sections with which we shall now be concerned. In general, of course, the stamp duty is indicated by "stamp", as is obvious from the scheme of the Act and its very little. But certain special situations require special provisions; and to meet those special situations, special provisions are enacted in section 8 and the succeeding sections.

9.2. Section 8-Recommendation.-

Section 8 is a special provision applicable to bonds, debentures or other securities issued on loans under the Local Authorities Loans Act, 1879. The provision was originally introduced, it seems, in 1897,1 to give facilities to local Authorities for issuing debentures upon payment of composition duty. Section 8 (English), Finance Act, 1899, is in similar terms. The Local Authorities Act, 1879, referred to in the section, has since been replaced by the Local Authorities Loans Act, 1914; and the section should, therefore, be amended to substitute a reference to the latter Act. We recommend accordingly. We may add that the replies received to our Questionnaire2 have favoured such an amendment.

1. The Indian Stamp Act (1879), Amendment Act, 1897 (13 of 1897).

2. Question 24.

9.3. Section 9-Width of the power.-

Section 9 deals with the power of the Government to reduce, remit or compound stamp duties. It is one of the most important sections of the Act, and certainly one of the most frequently used sections. Whether duty should be remitted or reduced in a particular case, depends on a variety of factors, which are too numerous and fluctuating to permit codification. That is the principal justification for the section.

9.4. While the conferment of such a power can hardly be objected to in modern times, it becomes necessary to point out that the power is very wide in its ambit. Under the section, the Government may, by an order published in the Official Gazette, grant reduction or remission. Such reduction or remission can be granted-(i) prospectively, or (ii) retrospectively. The reductions and remissions can apply in (i) the whole or (ii) any part of the territories under the 'administration' of the Government. They can apply to the duties with which (i) any instrument, or (ii) any particular class of instruments, or (iii) any of the instruments belonging to such class, or (iv) any instruments when executed by or in favour of any particular class of persons, or by or in favour of any members of such class, are chargeable.

Government can, by similar rule or order, also provide for the composition or consolidation of duties in the case of issues by any incorporated company or other body corporate of debentures, bonds or other marketable securities. The expression "the Government" in the section means-

(a) in relation to 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, and in relation to any other stamp duty charge able under this Act and falling within entry 96 in List I in the Seventh Schedule to the Constitution, the Central Government;

(b) save as aforesaid, the State Government.

9.4A. History.-

As to this expression, it may be noted that before 1937, the Governor General-in-Council was the only authority empowered to remit or reduce or compound duty under the section. The Adaptation Order of 1937 substituted the words "the collecting government" for the words "Governor General-in-Council-and also inserted a definition of "collecting Government". The Adaptation Order of 1950 substituted the words "the Government" in section 9, and also added sub-section (2), defining the expression "Government". It also removed the definition of" "collecting Government".

9.4B. Delegation-Validity of.-

Reverting to the present section, we are of the view that since the power delegated by the section in very wide, some safe-guards are needed. In one case decided by the Supreme Court,1 which is very relevant to the point of delegation, the Court, while declaring sections 4 and 7 of the Travancore-Cochin Land Tax Act, 1955 (15 of 1955) to be unconstitutional, observed

"Further, section 7 of the Act quoted above, particularly the latter part, which vests the Government with the power wholly or partially to exempt any bond from the provisions of the Act,2is clearly discriminatory in its effect; and, therefore, infringes Article 14 of the Constitution. The Act does not lay down any principle "or policy for the guidance of the exercise of discretion by the Government in respect of the selection contemplated by section 7."

The Supreme Court in this connection also referred to the Dalmia case3, and quoted from the judgment in that case.

1. Kunnathat Thuthunni Moopil Nair v. State of Kerala, AIR 1961 SC 552: (1961) 3 SCR 77.

2. Emphasis Supplied.

3. Ram Krishna Dalmia v. Justice S.R. Tandolkar, AIR 1958 SC 538 (548-49).

9.5. Recommendation to add the criterion of public interest.-

While the validity of section 9 has not been contested so far, it appears to us desirable that in order to preserve its validity, some criterion regulating the exercise of the power delegated thereby should be added. We, therefore, recommend the insertion of the criterion of "public interest" in relation to the grant of a reduction or remission by notification under section 9. This could be achieved by adding the words "if satisfied that it is necessary in the public interest" after the words "the Government", in section 9(1). We recognise that this is not a very precise test, but even then, it will give some indication of the legislative policy and lessen the possibility of a successful attack on the validity of section 9(1). We may mention that such an amendment has been supported by most of the replies to our Questionnaire.1

Case law on the section reveals no conflict of views, obscurities or other difficulties in the working of section 9. Hence no other change is necessary.

1. Question 26.

9.6. Section 9A (New).-

At this stage, we would also like to deal with the question of consolidation of duties in respect of receipts. In the State of Maharashtra,1 the following new section has been inserted, conferring power on the State Government to consolidate duties in respect of receipts:

"9A. The State Government may, by order published in the Official Gazette, provide for consolidation of duties in respect of any receipts or class of receipts given by any person including any Government) subject to such conditions as may be specified in the order."

1. Maharashtra Act 1 of 1971.

9.6A. Recommendation.-

It would, in our opinion, be useful to have a similar provision in the Act. Such a change has been approved by most of the replies,1 to our Questionnaire. We recommend accordingly.

1. Question 25 of our Questionnaire.

9.7. Section 10.-

Section 10 deals with the mode of payment of duty. Duty is ordinarily paid in stamps; but in exceptional cases, it can be received in cash under certain special provisions of the Act. We have received a suggestion to provide for payment in cash in certain other cases. Its genesis is as follows.