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Report No. 67

19.8. Objections answered.-

The objection that if the person producing the document is not made liable, then there is no other method of recovery, was answered in the Lahore case.1 It was pointed out there that the document can be impounded.

1. Moohamed Hussain v. Emperor, AIR 1940 Lah 315 (Supra)

19.9. Basic question.-

There is also the basic question to be considered, namely, is it logical to compel the person producing the document to pay the duty and penalty when the primary obligation was not his? After all, provisions by way of sanctions are secondary, and are inserted to enforce an original liability that has been separately created. Since sections 40 and 48 ate silent as to the person from whom the duty is due, it would hardly be appropriate to apply the sanction under section 48 against the person producing the document merely because he happens to have produced the document, when the original liability was not created against him by any other provision.

19.10. The point may be raised that section 40 is mentioned in section 44, and this must have some meaning. The answer is that this part of section 44 can come into pay where the person producing the document but not paying the duty etc. in court later chooses to pay the duty in his own interest. Exigencies of litigation force him to do so, and, in that situation, he must have a remedy against the person bound to pay the duty. Section 44 does not deal with the right of the State to levy the stamp duty and penalty under sections 40 and 48.1 The basic question to be examined is; on Whom is the duty imposed? Whatever may be the correct answer to this question, it is certainly not to be answered from sections 40 and 44, which are themselves ambiguous.

1. Subramania v. R.D.O., AIR 1956 Mad 454 (458), para. 13.

19.11. Thus, apart from-(i) the juristic impropriety of enforcing a sanction against a person not primarily liable, and (ii) the fact that section 44 can be satisfactorily explained otherwise there is also the question of hardship. The person from whose possession the document came cannot be used as an instrument for recovery of the penalty merely by saying that he himself can recover it under section 44. If a is not liable to pay a tax, it would not be equitable to force A to do so and give him a remedy to recover it from B who is the person liable to pay the tax.

19.12. Various points considered.-

Making the person producing the instrument liable has the merit that the Collector can easily recover the duty from him. But such a provision has several defects-

(a) It is not in furtherance of the scheme of the Act regarding liability to bear the duty.

There is no provision in the Act making a person, who merely presents an insufficiently stamped document for being admitted in evidence, liable for payment of the requisite stamp duty or penalty on the document. He cannot, therefore, be considered to be a "person from whom the stamp duty or penalty is due", and consequently the same cannot be recovered from him under section 48. If the stamp duty or penalty has to be recovered compulsorily, it can be legally recovered, under section 48, only from the person from whom the same is due.

(b) It is against the view of majority of the High Courts. Hence such a provision means a radical change.

(c) It is juristically wrong, when the original liability is not of the person producing. It is juristically incorrect to apply a sanction against him.

(d) It is unjust also to do so. He had no hand in the execution of the instrument and, therefore, could not have avoided the default in duty.

(e) It is poor consolation that he can, recover it in his turn, from the person "bound to bear the expenses". Imposition of an obligation without proper grounds is not excused by providing a remedy for re-imbursement which may consume expense and time.

(f) Moreover, the person who is bound to bear the expenses may not be traceable. In that case, the person ordered will not be in a better position than the Collector.

(g) It is even doubtful whether the remedy under section 44 will be available in cases outside section 29.

(h) Thus, to make him liable is against the scheme of the Act, against general legal principles, against equity and against convenience.

The alternative is to make the executant liable. Section 17 says:

"An instrument chargeable with the duty and executed by any person in India, shall be stamped before or at the time of execution."

Section 62 says that the executant of such instrument shall, for every such offence, be punished with fine which may extend to Rs. 500, provided that when any penalty has been paid in respect of any instrument under sections 35, 40 or 61, the amount of such penalty shall be allowed in reduction of the fine, if any, subsequently imposed under this section in respect of the same instrument upon the person who has paid such penalty. Thus, these sections read together indicate, that the executant of such document is the person against whom the Collector should proceed under sections 40 and 43 for collecting the stamp duty and penalty. It is significant that the proviso to section 62 makes mention also about the penalty levied under section 40, and makes a provision for its deduction from the fine.

19.13. Amendment-lines of.- We are, therefore, of the opinion that the provisions of section 48 should be enforceable-

(a) against persons who are liable by virtue of section 19, agreement, or section 29 or 30, as the case may be, and

(b) where none of the above mentioned sections apply, then against the person executing the document in question.1-2

19.14. Recommendation.-

We recommend that the Act should be amended on the above lines. We may state that most replies to our Questionnaire have favoured such an amendment. The appropriate place for it appears to be in the Chapter containing sections 29-30. It is for these reasons that we have recommended the insertion of a new section.3 That will solve questions arising under section 48 also.

1. Cf. section 62(b).

2. Q. 55-58.

3. Section 30A, supra.

Indian Stamp Act, 1899 Back

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