IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH CWP. No. 12720 of 2008 Date of Decision: 2.7.2010. Vishav Real Estate Pvt. Ltd. And another --Petitioners Versus The Divisional Commissioner, Patiala Division, Patiala and others --Respondents CORAM:- HON'BLE MR.JUSTICE PERMOD KOHLI. Present:- Mr. Anil Kshetarpal, Advocate for the petitioners. Ms. Kavita Arora, A.A.G., Punjab for respondents no.1 to 3. Mr. H.N. Mehtani, Advocate for respondent no.4. *** PERMOD KOHLI.J (ORAL) Respondent no.2 vide its tender notice invited sale tenders for sale of 7.69 acres of land, plant & machinery and building salvage of its unit Panipat Woolen Mills, Kharar on “AS IS WHERE IS BASIS”. The interested tenderers were at liberty to submit offers for each part separately/in combination of any two or composite sale of the whole unit. Petitioner no. 2 submitted its comprehensive tender for whole of the unit for a cumulative price of Rs. 12.50 crores. Tender of petitioner no.2 was accepted vide communication dated 10.11.2004 in respect to sale of the 7.69 acres of land including building, plant & machinery on “AS IS WHERE IS BASIS”, on the basis of the assessments made by the assets and sales committee of the respondent no.4. Petitioner was permitted to pay the sale consideration in the following manner:- “ (a) 1st installment Rs. 4,17,00,000/- on 11.12.2004 or earlier (b) 2nd installment Rs. 4,17,00,000/- on 11.01.2005 or earlier CWP. No. 12720 of 2008 -2- (c) 3rd installment Rs. 3,36,00,000/- on 11.02.2005 or earlier (d) amount already lying with us as earnest money. Rs. 80,00,000/- Total:- Rs. 12,50,00,000/-” The sale letter further stipulated that after remittance of 1st installment of Rs. 4.70 crores petitioners would be permitted to lift the machinery and scrap etc. On deposit of the 1st installment, petitioner no.2 was permitted to remove machinery, stores, spares and scrap etc. vide letter dated 9.12.2004. Consequently, the petitioner lifted the machinery, stores/spares and other scrap items. Petitioner deposited the 2nd installment of Rs. 1.28 crores and was permitted to demolish the building structure and dispose of the salvage material vide letter dated 26.7.2005. The petitioner, thus, demolished the building and sold the demolished building material including cables, bricks, windows, iron sheets etc. Petitioner no.2, thereafter, obtained the sale deed from the respondent no.4 in the name of Special Purpose Vehicle Company i.e. petitioner no.1 for the land measuring 7.69 acres for a sale consideration of Rs. 5.85 crores. The sale deed was registered on 29.12.2005. A show cause notice was served upon petitioner no.1 by the A.D.C., Mohali which was responded to by the petitioner no.1 vide its communication dated 21.12.2006 (Annexure P-7) detailing out the transaction in question. The Collector vide its order dated 4.1.2007 assessed the value of the property at Rs. 12.50 crores and directed the petitioner to pay the deficient stamp duty of Rs. 59,85,000/- along with interest @ 12% p.a. on the date of registration of the instrument. Aggrieved of the order of the Collector, petitioner no.1 preferred an appeal in the court of Commissioner (Appeals), Patiala Division, Patiala. The Appellate CWP. No. 12720 of 2008 -3- Authority vide its order dated 29.4.2008 dismissed the appeal. Petitioners have, thus, challenged the orders (Annexures P-8 & P-10) passed by the Collector and the Appellate Authority in the present writ petition. The contention is manifold. (i) Stamp duty is payable only on the immovable property as defined under Stamp Act. (ii) The tender notice itself invited offers for moveables and immovable separately as also comprehensively. Valuation of only immovable property is to be taken into consideration for levying the stamp duty. (iii) Separate assessment was made for the land and building by the authorized evaluators and thus the combined value of the moveables and immovables cannot be made basis for levy of stamp duty. (iv) The sale consideration was fixed above the Collector rate fixed for the area and thus the Collector was not entitled to hold any further inquiry and ask for additional stamp duty. From the perusal of the impugned orders, it is evident that before the sale of the property i.e. M/s Hardicon Ltd. ICICI bank had evaluated the plant and machinery at Rs. 1.13 crores and the building salvage at Rs. 22 lacs in January, 2004. The evaluation of the land was assessed by ICICI bank at Rs. 2.36 crores in May, 2002. However, the assets and sales committee of respondent no.4 had fixed the reserved price of plant, machinery and building salvage at Rs. 2 crores against the assessed value of Rs. 1.35 crores by M/s Hardicon Ltd. The Collector, however, had fixed the value of commercial land at Rs. 5,000/- per sq. yard and at this rate the reserved price of the land was fixed at Rs. 5.85 crores. The total reserved price of the land, plant and machinery and building salvage was fixed at Rs. 7.85 crores. However, the final sale consideration paid by the petitioner no.1 was Rs. 12.50 crores. CWP. No. 12720 of 2008 -4- Even in the reply filed, this factual background is not disputed. It has also been established on record that at the time of execution of the sale deed neither there was any plant and machinery nor any building salvage on the land. The sale deed was in respect to the clear piece of land. Both the Collector and the Appellate Authority have rejected the contentions of the petitioners for accepting the value of the sale consideration for purposes of stamp duty only on the ground that since it was a comprehensive sale of the land and machinery/building, the stamp duty is payable on the total sale consideration. The question whether moveables even if embedded in the earth can be considered as immovable property was considered by the Hon'ble Supreme Court in a case reported as 1998 (1) SCC 400 titled as Sirpur Paper Mills Ltd. Vs. Collector of Central Excise, Hyderabad. Considering this question, Hon'ble Supreme Court observed as under:- “ 5. Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery CWP. No. 12720 of 2008 -5- are fixed in the earth for better functioning, it does not automatically become an immovable property.” In the present case as well the moveable property was separately identified and even separate offers were also invited. The petitioner in his wisdom quoted combined price of the immovable and the moveable properties. It has come on record that separate evaluation was made for moveables including the building salvage and interested purchaser was entitled to quote separate price for moveables and immovables. It is also established on record and rather admitted by the respondents that on payment of the 1st installment of Rs. 4.70 crores petitioner was permitted to remove all moveables like machinery, scrap etc. and on deposit of another amount of Rs. 1.28 crores the building salvage was also allowed to be removed. At the time of the execution of the sale deed only a clear plot of land was available for which a sale deed was executed at the consideration of Rs. 5.85 crores. It is not in dispute that moveable property could be sold without registered sale deed. As a matter of fact tender document could not have been made the basis for levy of stamp duty as it was for moveable and immovable properties both. The Collector was required to assess and determine the value of the immovable property at the time of sale. It is also admitted position that the sale consideration fixed in the sale deed i.e. Rs. 5.85 crores was not less than the Collector rates. Both the authorities below i.e. Collector and the Appellate Authority thus committed a glaring illegality in determining the combined value of the immovable and moveables properties as the sale consideration for levy of stamp duty. Thus, both the orders are liable to be quashed. I order accordingly. CWP. No. 12720 of 2008 -6- The matter is remitted back to the Collector with a direction to re-determine the value of the moveables and after holding a fresh inquiry and affording the opportunity of being heard to the petitioners, re-determine the value of the immovable property at the time of the sale for the purpose of levy of stamp duty. (PERMOD KOHLI) JUDGE 2.7.2010. lucky Whether to be reported? Yes.