Report No. 67
Recovery from Person from whom Duty is due
A very important topic, which comes up again and again before the courts but which, unfortunately, is not dealt with directly and specifically in the Act, now requires to be considered.
19.2. Section 48-Obscurity.-
Section 48 provides that all duties, penalties and other sums required to be paid under this Chapter may be recovered by the Collector by distress and sale of the movable property of the "person from whom the same are due", or by any other process for the time being in force for the recovery of the arrears of land-revenue. As to the "person from whom the duty is due" within the meaning of this section, the section is silent. While discussing1 section 40, we had said that the matter will be considered under section 48, i.e. the question as to who is the person liable to pay the duty etc. for the purposes of recovery under .the Act, where the duty etc. is not paid by the party producing the document. The difficulty is created by the words "under this Chapter". Do they include section 40(1)(b)?
The order under section 40(1)(b) need not be addressed to any person. It is a determination that the instrument is
(i) chargeable with a particular duty, and
(ii) not duly stamped.
The order is an order in the abstract. It determines the payability, but not the person liable to pay. The person producing the document pays, but the order under section 40(1)(b) does not say that he should pay. The order is an impersonal order. There is an element of compulsion, inasmuch as, without payment, the Collector would not return the document under section 40(3). But there is no decision as to the person liable.
1. See discussion as to section 40, supra.
There is considerable obscurity in this respect, and the obscurity arises primarily from the fact that, excepting in a very limited number of cases,1 the Act does not give any specific and comprehensive guidance as to the person who is to be regarded as one liable to pay stamp duty. There are elaborate provisions in the Act as to the instrument which are chargeable to duty2 and as to the time of stamping,3 and also as to the mode of using stamp.4 However, excepting for a few cases, it is not easy to ascertain from the provisions of the Act the person who is bound to pay the duty within the meaning of section 48.
1. Sections 19, 29, 30, see infra.
2. Section 3.
3. Sections 17, 18 and 19.
4. Sections 10 to 16.
19.4. Cases specifically deal with sections 19, 29 and 30.-
The cases specifically dealt with are contained in-(i) section 19, which relates to bills and notes drawn out of India, (ii) section 29, which, in the case of certain instruments, provides as to who shall bear the burden of proper stamp, and (iii) section 30, dealing with receipts. Section 29 is a somewhat general provision, though not exhaustive. And event that section does not very clearly indicate whether it is to operate as between the parties, or whether it is to operate also between the State on the one hand, and the private party on the other hand, so as to be available for interpreting section 48.
19.4A. Various persons mentioned in various sections.-
When the question of production of an instrument before a court or public officer arises, section 35 steps in, and provides the machinery for the recovery of stamp and penalty. But, here again, it is not clear whether the person who is interested in producing the document in evidence under section 35 is also the person against whom section 48 can be applied, if he does not deposit in court the duty and penalty. The executant, who is the person bringing the document into existence, would appear to be primarily liable to the State under section 17, which says that all instruments chargeable with duty and executed by any person in India, shall be stamped, before or at the time of execution. Under section 62 also, in most cases, the executant is liable to be prosecuted and punished for executing or signing, otherwise than as a witness, an instrument chargeable with duty, without the same being duly stamped. Thus, even assuming that they can be pressed into service for the purposes of section 48-the provisions referred to above do not yield a uniform answer as to the question, who is the person liable?
19.5. Inter-relationship of section 29 with section 48-Conflict of views.-
judicial decisions are also not unanimous. The conflict of views on the question whether persons liable to pay the duty under an agreement or under section 29 are also the persons to be regarded as liable under section 48 as the persons from whom the duty is due; can be thus summarised:
(a) One view on the subject is that such persons are not liable under section 48, and that only the executant of the instrument can be called upon to pay this duty under section 48.1
(b) Another view is that only the persons liable under section 29 or under any agreement are the persons from whom the duty can be recovered2 under section 48. According to this view, in cases not covered by section 29, the instrument can merely be impounded, but no one is liable to be called upon to pay the duty and penalty until it is sought to use the document.
Section 29(c).-In an Orissa3 case, there was a demand for additional duty on the vendor. No finding that there was 'agreement to the contrary' was recorded. It was held that the demand was illegal. The vendee (and not the vendor) was liable. Section 29(c) was relied upon. This case illustrates the view taking section 29 as the criterion.
(c) On the liability of the person producing, there is a conflict of decisions.4 One view on the subject is that the duty can be recovered under section 48 from the person producing the document also.5 But this view has been dissented from.6-7
(d) A fourth view is that both the executant and the parties liable under section 29 or by agreement, can be called upon to pay the duty under section 48. This was the view of Bhimasankaran J., in an Andhra case.8
1. Subramaniam Chettiar v. Revenue Divisional Officer, AIR 1956 Mad 454.
2. Roop Chand v. Secretary of State, 1939 Nag LJ 364, referred to in M. Ramaswami v. State of Travancore, AIR 1951 Tray-Co 251 (252), para. 6.
3. P. Appa Rao v. Additional District Magistrate, Koraput, AIR 1975 Ori 209.
4. See case law reviewed in Mohamed Hussain v. Emperor, AIR 1940 Lah 315, see also AIR 1970 MP 74.
5. Secretary of State v. Basarstullah, 1908 ILR 30 All 271.
6. Mohamed Hussain v. Emperor, AIR 1940 Lah 315.
7. As to joint and several liability, see AIR 1962 Mad 425 and (1967) 2 MLJ 567 and AIR 1970 MP 74.
8. Board of Revenue v. Appala Narasimhalu, 1957 Andhra Weekly Repeater 288 (FB) (Bhimasankaran, J.).
19.6. Need for clarification.-
In view of the obscurity and uncertainty of the position in regard to the Inter-relationship of section 29 and similar sections on the one hand, and section 48 on the other hand, it is desirable that the matter should be put beyond doubt. It is neither in the interests of the State nor in the interests of the citizen that liability to bear the tax should be left in doubt.
19. 7. Lines on which amendment should be made-View of Bhide J. quoted.-
As to the lines on which the section should be amended, we are in broad agreement with what Bhide J. said in the Lahore High Court in Muhammad Hussan's case. In the Lahore case,1 Bhide J. observed:
"If the intention of the Legislature was that the necessary duty or penalty should be recovered from the person who wishes to have the document admitted in Court, one would have expected to find some provision to that effect in the section itself or at least somewhere else in the Act. But no such provision has been made. The reason is, I think, not far to seek. When a person wishes to have a document admitted in Court for the purpose of his case, it may often be to his interest to pay the duty and penalty at once in order to get the document admitted in evidence, as the person who was originally bound to bear the expense of providing the stamp duty may not be traceable at the time or may not be prepared to pay the duty or penalty voluntarily.
If he does so to suit his convenience, the provisions of section 44 enable him to recover the same from the person who was originally bound to bear the expense of providing the duty. But there is nothing in section 35 or section 40 to enable either the Court or the Collector to compel the person who wishes to have the document admitted in evidence in Court to pay the duty or penalty. The only reasonable inference in the circumstances seems to be that the payment of such duty or penalty is left to his choice under there sections. There seems, in fact, no good reason why a person, who merely wishes to have a document admitted in evidence, should be compelled to pay the duty or penalty thereon, when he is not the person who was originally bound to bear the expense of providing the duty.
If he does not choose to pay the duty and penalty under section 35 or section 40, he has to take the consequence of not being able to use the document. But it would be obviously hard and unfair to compel such a person to pay the duty on the document merely because he attempted to produce it in evidence. The stamp duty may be heavy and he may not be even in a position to pay it, or it may not be worth his while to do so, for the purposes of his case. The Legislature therefore seems to have advisedly left the matter to his choice. It is true that the Collector may not be able to trace easily the executant or the person bound to pay the duty on the document in such cases and there may be some inconvenience as a result in collecting the stamp duty or penalty. But this can scarcely justify penalizing a person who was not responsible for paying the stamp duty at the time of the execution of the document."
We find ourselves in broad agreement with this view.
1. Mohamed Hussain v. Emperor, AIR 1940 Lah 315 (317).