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Report No. 67

20.22. Need for charge.-

One need not examine the correctness of the conclusion reached by the High Court on the present law. But the resultant position is hardly satisfactory. Where tax is not legally leviable and yet has been paid, it ought to be refunded-subject, of course, to such safeguards of limitation and deduction for office expenses as are usual. To adhere to the old doctrine that money paid under mistake of law cannot be recovered, is inequitable. There ought to be some provision empowering the Board to grant refund in such cases. One could even construe the expression "inadvertently" in section 52(a) as covering the situation, but, since the judicial construction now does not permit the citizen to do so, we recommend that the words "or by mistake of fact or law" should be added after the word "inadvertently" in section 52(a) at both the places.

20.23. Position under the Income-Tax Act.-

It may be noted that under the Income-tax Act1 if any person satisfies the income-tax Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under the Act for that year, he shall be entitled to a refund of the excess. In the actual administration of this section, or in the case law reported thereon, one does not find any limitations to the effect that the overpayment must have been made in particular circumstances or for a particular reason. There are, no doubt, procedural formalities and also a period of limitation (current period is 2 years). But there is no substantive restriction on the right to refund. If the Income-tax Officer does not grant the refund within three months from the prescribed date, there is even a provision for interest. According to the Contract Act2, a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. This section is wide enough to cover mistake of law.3

1. Section 237, Income-Tax Act, 1961.

2. Section 72, Indian Contract Act, 1872.

3. Shiba Prasad v. Maharaja Srish Chandra, (1949) 76 IA 244: 52 Born LR 17: AIR 1949 PC 297; approving Jagdish Prasad Pannanlal v. Produce Exchange Corporation, (1945) 2 Cal 41: AIR 1946 Cal 245.

20.24. Liability of State for refunding tax levied by mistake.-

The settled position in law, as regards the liability of the State in regard to sales tax levied by mistake as laid down by the Supreme Court,1-2-3 is that where tax is levied by mistake of law, then ordinarily it is the duty of the State, subject to any provision of the law relating to sales tax, to refund the tax. In the Andhra Pradesh case, therefore, it could have been argued that even in the absence of a specific statutory provision, the person who paid the duty could have claimed refund on general principles. Perhaps, however, counsel may have thought that the general principles, illustrated by the judicial decisions referred to above, were confined to a tax collected under a positive order of a taxing officer and may not be applicable to a tax which a citizen pays on his own calculations. Section 72, Contract Act (money paid under mistakes was not discussed).

1. State of Kerala v. Aluminium Industries, (1965) 16 STC 689 (SC), referred to in the Yearly Digest 1965 KLR 528.

2. State of Madhya Pradesh v. Shailal Bhai, AIR 1964 SC 1000 (1010), paras. 14 to 17.

3. Gill &. Co. v. Commercial Tax Officer, Civil Appeal No 1580-1595 of 1967, dated 9-2-1968: 1968 SC Notes 80: (1968) 22 STC 524 (SC).

20.25. Recommendation to revise section 52(a).-

In the light of the above discussion, we recommend that section 52(a) should be revised as follows:-

"52. (a) When any person has inadvertently or by mistake of fact or law

(i) used for an instrument chargeable with duty, a stamp of a description other than that prescribed for such instrument by the rules made under this Act, or

(ii) used a stamp of greater value than was necessary, or

(iii) used any stamp for an instrument not chargeable with any duty;

or"

20.26. Section 53.-

Sections 49 to 52 having provided for allowance for spoiled stamps or printed forms no longer required or misused stamps, section 53 contains a precise provision as to how this allowance is to be made. The section enacts that in any case in which allowance is made for spoiled or misused stamps, the Collector may give in lieu thereof-(a) other stamps of the same description and value; or (b) if required and (if) he thinks fit, stamps of any other description to the same amount in value; or ic.). at his discretion, the same value in money, deducting 10 naye paise for each rupee or fraction of a rupee. There are several points of detail which require discussion.

(i) It is not very clear whether this section applies also where the allowance is made in case of printed forms under section 51, and we think that that should be brought out, by providing that the section applies.

(ii) Secondly, so far as clause (c) is concerned, the grant of refund in cash is discretionary with the Collector, but we are of the view that it should be mandatory, because a party will have no use for other stamps if given under clause (a). In fact, a party cannot, in general, sell stamps.1

(iii) Thirdly, when refund in cash is granted under clause (c), the present section requires a deduction of 10 naye paise for each rupee or fraction of a rupee which, we think, is rather on the high side. The amount was originally one anna per rupee and was, in 1958, on the introduction of decimal coinage, replaced by 10 naye paise as a routine. There is, however, in our view, scope for a more lenient provision in so far as refund under section 53(c) is concerned.

(iv) Fourthly, there seems to be some obscurity2 as to whether the deduction of 10 paise per rupee under section 53 is to be applied in respect of the totalled up value of the stamps of the instruments, or whether it is to be applied in respect of each stamp. This obscurity should be removed by adopting the first alternative.

(v) Fifthly, so far as refund in the situation dealt with in section 51 (printed forms no longer required) is concerned, justice requires that there should be no deduction, because here it is by reason or circumstances beyond the control of the party that the printed forms have become useless.

(vi) Sixthly, in other situations, the deduction can be said to represent office expense, incurred on applications for petty amounts which may be filed with some frequency. But, here again, it is fair that there should be a suitable maximum in respect of the deduction on each transaction, say, 5 rupees. Office expense on a particular transaction is not, in the generality of cases, likely to exceed five rupees.

(vii) Having regard to our view3 that the action under clause (c), i.e. refund in cash, should be the rule rather than the exception, that clause should appear before the other clauses.

(viii) Finally, as to clause (b) which deals with refund in the form of stamps of other description, we are of the view that the Collector should have no discretion. If the applicant prefers that form, it should be allowed.

1. Section 69.

2. See the differing directions given in the various Stamp Manuals.

3. See discussion, supra point (ii).

20.27. Recommendation.-

In the light of the above discussion, we recommend that section 53 should be revised as follows:

Revised section 53

53. (1) In any case in which allowance is made for spoiled or misused stamps under section 49 or section 52, or in respect of printed forms no longer required under section 51, the Collector may give, in lieu thereof-

(a) the same value in money, deducting, subject to the provisions of sub-section (2), five paise for each rupee or fraction of a rupee; or

(b) if the applicant so requires, other stamps of the same description and value; or

(c) if the applicant so requires, stamps of any other description to the same amount in value.

(2) The deduction under clause (a) of sub-section (1)

(i) shall be calculated on the total value of the stamps;

(ii) shall not exceed five rupees; and

(iii) shall not be made where the allowance is granted tinder section 51.

We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire.1

1. Question 60 (Section 53).

20.28. Section 54.-

Section 54 reads-

"54. When any person is possessed of a stamp or stamps which have not been spoiled or rendered unfit or useless for the purpose intended, but for which he has no immediate use, the Collector shall repay to such person the value of such stamp or stamps in money, deducting ten nape poise for each rupee or portion of a rupee, upon such person delivering up the same to be cancelled, and proving to the Collector's satisfaction-

(a) that such stamp or stamps were purchased by such person with a bona fide intention to use them; and

(b) that he has paid the full price thereof; and

(c) that they were so purchased within the period of six months next preceding the date on which they were so delivered:

Provided that, where the person is a licensed vendor of stamps, the Collector may, if he thinks fit, make the repayment of the sum actually paid by the vendor without any such deduction as aforesaid."

In this section also, the provision as to deduction should be amended on the same lines as1 in section 53, as recommended. We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire.2

1. See recommendation as to section 53.

2. Question 61 (Section 54).

20.29. Section 54A.-

According to section 54A, notwithstanding anything contained in section 54, when any person is possessed of a stamp or stamps in any denominations, other than in denominations of annas four or multiples thereof and such stamp or stamps has or have not been spoiled, the Collector shall repay to such person the value of such stamp or stamps in money calculated in accordance with the provisions of sub-section (2) of section 14 of the Indian Coinage Act, 1906, upon such person delivering up, within six months from the commencement of the Indian Stamp (Amendment) Act, 1958, such stamp or stamps to the Collector. The section needs no change.

20.30. Section 55.-

According to section 55, when any duly stamped debenture is renewed by the issue of a new debenture in the same terms, the Collector shall, upon application made within one month, repay to the person issuing such debenture, the value of the stamp on the original or on the new debenture, whichever shall be less. The proviso requires that the original debenture should be produced before the Collector and cancelled by him in such manner as the State Government may direct. Under the Explanation, a debenture shall be deemed to be renewed in the same terms within the meaning of this section notwithstanding the following changes:-

(a) the issue of two or more debentures in place of one original debenture, the total amount secured being the same;

(b) the issue of one debenture in place of two or more original debentures, the total amount secured being the same;

(c) the substitution of the name of the holder at the time of renewal for the name of the original holder; and

(d) the alternation of the rate of interest or the dates of payment thereof. No changes are needed in this section.



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