Case: Government Of A.P.  Vs. P. Laxmi Devi

4. Under Section 3 of the Indian Stamp Act, 1899 certain instruments are chargeable with the duty mentioned in the Schedule to the Act. Item 23 in the Schedule to the Act mentions a ‘conveyance as one of the documents requiring payment of stamp duty. A ‘conveyance is defined in Section 2(10) of the Act and includes a sale deed. Since in the present case we are concerned with payment of stamp duty on a sale deed, we have referred to the above provisions.5. Experience showed that there was large scale under valuation of the real value of the property in the sale deeds so as to defraud the Governments proper revenue. In the original Stamp Act there was no provision empowering the revenue authorities to make an enquiry about the value of the property conveyed for determining the correct stamp duty. Hence amendments were made to the Indian Stamp Act from time to time in several States including amendments by the Andhra Pradesh Legislature e.g. by the Indian Stamps (A.P. Amendment) Act 22 of 1971, Indian Stamps (A.P. Amendment) Act 17 of 1986 and ultimately by the AP Act 8 of 1998 (with effect from 1.5.1998). The scheme of Section 47A was to deal with such cases where parties clandestinely undervalued the property to evade payment of the correct stamp duty.6. After the 1998 amendment, Section 47A(1) of the Indian Stamp Act as applicable in the State of Andhra Pradesh reads asInstruments of conveyance, etc. how to be dealt with - (1) Where the registering officer appointed under the Registration Act, 1908, while registering any instrument of conveyance, exchange, gift, partition, settlement, release, agreement relating to construction, development or sale of any immovable property or power of attorney given for sale, development of immovable property, has reason to believe that the market value of the property which is the subject matter of such instrument has not been truly set forth in the instrument, or that the value arrived at by him as per the guidelines prepared or caused to be prepared by the Government from time to time has not been adopted by the parties, he may keep pending such instrument and refer the matter to the Collector for determination of the market value of the property and the proper duty payable thereon.Provided that no reference shall be made by the registering officer unless an amount equal to fifty per cent of the deficit duty arrived at by him is deposited by the party concerned.Under sub-clause (2) of Section 47A of the Stamp Act on receipt of a reference under sub-section (1), the Collector has to give opportunity of making a representation to the parties, and after holding such enquiry as prescribed by the Rules, shall determine the market value of the property which is the subject matter of the instrument, and the duty thereon.8. The respondent herein, had agreed to purchase land bearing S.No.594/B situated at village Kapra of Keesara Mandal of Ranga Reddy District. The agreement of sale was entered into on 25.1.1989 and as there was breach of performance of the contract on the part of the prospective vendor, a suit being O.S. No.1416 of 1997 was filed before the II Additional Senior Civil Judge, Hyderabad and the same was decreed. When the sale deed was not executed pursuant to the decree, Execution Petition No.5 of 2000 was filed. An officer of the Court was deputed to present the sale deed, which was stamped according to the directions of the Senior Civil Judge.9. The registering authority raised objection with regard to the quantum of non-judicial stamp on which the sale deed was engrossed. By letter no.288/2000 dated 19.2.2000, the registering authority, the Sub-Registrar, Malkajigiri, Ranga Reddy District, conveyed to the Second Senior Civil Judge, City Civil Court, Hyderabad that the document has to be referred under Section 47A and as a condition precedent for such reference, called upon the party i.e. the respondent herein, to pay duty on 50% of the differential amount according to the estimate made by him. Against this demand the respondent filed a writ petition in the High Court.10. In the writ petition filed by the respondent herein, it was inter-alia, contended that the estimate made by the registering authority was only provisional, and that will attain finality only after the Collector on a reference under Section 47A adjudicates the same, and for the reference for such adjudication no obligation can be imposed to deposit 50% of the deficit duty. Hence the said provision contained in the proviso to Section 47A is arbitrary and unreasonable violating the Fundamental Rights guaranteed in Articles 14 and 19(1)(g) of the Indian Constitution.11. A counter affidavit was filed by the State Government in the writ petition. The relevant paragraphs in the counter affidavit are quotedreply to the allegations made in the affidavit it is submitted that a sale deed was executed by II Senior Civil Judge, City Civil Court on 6.1.2000 and presented before me on 7.1.2000 through one of the staff members. The sale deed was admitted to registration and kept pending for want of clarification with regard to market value. The market value is arrived at Rs.6,17,80,500/- as per the market value guidelines for 33 acres 12 guntas whereas the sale deed executed was for a consideration of Rs.2,40,000/-. Thus there is huge loss to the Government Exchequer to a tune of Rs.70,77,160/- in stamp duty. Therefore, I sought clarification from the District Registrar, R.R. District (2nd Respondent). The 2nd respondent in his letter dated 473/G1/2003 dated 9.2.2000 ordered me to take action under Section 47A of Indian Stamp Act for determination of market value. Hence the action taken by the 3rd respondent i.e. Sub-Registrar, Malkajgiri is true and proper in the matter.In reply to the allegations made paras 6 to 8 of the petitioners affidavit it is submitted that the petitioners are liable to pay 50% of the deficit amount as per the Indian Stamp (A.P. Amendment) Act, 1998. The appeal filed by the petitioner is without any merits and is liable to be dismissed with a direction to the petitioner that 50% of the deficit amount assessed by the Sub-Registrar concerned and as per the directions of the Honble Chief Judge, City Civil Court, Hyderabad should be deposited before a reference could be made under Section 47A of the Indian Stamp Act, as amended through Act No.8 of 1998. It is submitted that the proviso under Section 47A(2) was amended and the amendment has come into force with effect from 1.5.1998. Hence, it is necessary that the petitioner shall deposit the deficit duty as determined by the registering officer".By the impugned judgment the High Court has declared Section 47A of the Indian Stamp Act as applicable to State Government to be unconstitutional.13. In the impugned judgment the High Court hasimposition of deposit of 50% of the differential stamp duty for referring the document to the Collector runs beyond the object and intendment of the above statutory provision. The object and intendment of the Stamp Act is to collect the proper stamp duty and such proper stamp duty is dependent upon the determination of the market value of the subject matter of the document and such determination is only made by the Collector and until such determination is made by the Collector, the document which is received for registration even after collection of whatever stamp duty deposited and the registration fee is paid by the party, is not released to the party, but is kept pending registration and such document kept pending registration is not having any evidentiary value and is not entered into the books of registration and no certified copy of the same can be granted and no rights flow from such document, be it sale, exchange, gift, mortgage, lease, etc. By keeping the document pending registration, there is enough safeguard for collecting the deficit stamp duty, as in the event of the Collector accepting the valuation suggested by the Registering Office and the party not paying the said stamp duty, the document remains under pending registration and even may be returned to the party for want of the payment of the differential stamp duty. This being the aim and intendment of the stamp duty protecting the public exchequer, there is absolutely no nexus for calling upon the party to deposit 50% of the differential stamp duty as a condition for making reference. It is not that a party seeks a reference on his own, but the Registering Officer is duty bound to refer the moment a party does not accept the valuation suggested by him. The party presenting a document is the master of his choice as to whether he should deposit the deficit stamp after determination of the Collector or not. If he feels that the market value determined by the Collector is exorbitant, then he may resile from going ahead with the registration of the document and may take return of the document. There is nothing to stop him from doing so. Stamp duty is not skin to a compulsory tax such as, property taxes levied upon the house properties, sales tax levied upon the turn-over, income-tax levied upon the income prescribed etc. If a party wants to have his document registered, he should pay stamp duty and should he feel that it is exorbitant and he cannot bear the same, he can resile from the same even after presenting the document. The authority under the Stamp Act cannot force upon the party to compulsorily pay the stamp duty. Such compulsion is imposed only upon the partys insistence for registration of the document and not otherwise. In such circumstances, the imposition of deposit of 50% of the amount towards the differential stamp duty as a condition for referring the matter to the Collector runs beyond the scope, intendment and object of the act and, thus, offends equal protection of laws guaranteed under Article 14 of Indian Constitution and thus, is arbitrary and the said proviso to Section 47A of Indian Stamp Act which reads :"Provided that no reference shall be made by the registering officer unless an amount equal to fifty per cent of the deficit duty arrived at by him is deposited by the party concerned."is unconstitutional and is accordingly struck down."

Court's reasoning:
17. In our opinion, a registering officer under the Registration Act (in this case the Sub-Registrar) is certainly a person who is in charge of a public office. Section 33(3) applies only when there is some doubt whether a person holds a public office or not. In our opinion, there can be no doubt that a Sub-Registrar holds a public office. Hence, he cannot return such a document to the party once he finds that it is not properly stamped, and he must impound it.18. In our opinion, there is no violation of Articles 14, 19 or any other provision of the Constitution by the enactment of Section 47A as amended by the A.P Amendment Act 8 of 1998. This amendment was only for plugging the loopholes and for quick realization of the stamp duty. Hence it is well within the power of the State legislature vide Entry 63 of List II read with Entry 44 of List III of the Seventh Schedule to the Constitution.19. It is well settled that stamp duty is a tax, and hardship is not relevant in construing taxing statutes which are to be construed strictly. As often said, there is no equity in a tax vide Commissioner of Income Tax vs. Firm Muar AIR 1965 SC 1216 . If the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. Hence the High Court fell in error in trying to go by the supposed object and intendment of the Stamp Act, and by seeking to find out the hardship which will be caused to a party by the impugned amendment of 1998.In view of the above, we are clearly of the opinion that Section 47A of the Indian Stamp Act as amended by A.P. Act 8 of 1998 is constitutionally valid and the judgment of the High Court declaring it unconstitutional is not correct.In our opinion in this situation it is always open to a party to file a writ petition challenging the exorbitant demand made by the registering officer under the proviso to Section 47A alleging that the determination made is arbitrary and/or based on extraneous considerations, and in that case it is always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand under the proviso to Section 47A of the Indian Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Article 14 of the Constitution vide Maneka Gandhi vs. Union of India AIR 1978 SC 597. Hence, the party is not remedy-less in this situation.30. However, this would not mean that the proviso to Section 47A becomes unconstitutional. There is always a difference between a statute and the action taken under a statute. The statute may be valid and constitutional, but the action taken under it may not be valid. Hence, merely because it is possible that the order of the registering authority under the proviso to Section 47A is arbitrary and illegal, that does not mean that the proviso to Section 47A is also unconstitutional. We must always keep this in mind when adjudicating on the constitutionality of a statute.31. Since we have dealt with the question about constitutionality of Section 47A of the Stamp Act, we think it necessary to clarify the scope of judicial review of statutes, since Courts often are faced with a difficulty in determining whether a statute is constitutionally valid or not. We are, therefore, going a little deep into the theory of judicial review of statutes, as that will give some guidance to the High Courts in future.If a law (norm) in a higher layer in the above hierarchy clashes with a law in a lower layer, the former will prevail. Hence a constitutional provision will prevail over all other laws, whether in a statute or in delegated legislation or in an executive order. The Constitution is the highest law of the land, and no law which is in conflict with it can survive. Since the law made by the legislature is in the second layer of the hierarchy, obviously it will be invalid if it is in conflict with a provision in the Constitution (except the Directive Principles which, by Article 37, have been expressly made non enforceable).35. The first decision laying down the principle that the Court has power to declare a Statute unconstitutional was the well-known decision of the US Supreme Court in Marburyvs. Madison 5 U.S. (1Cranch) 137(1803). This principle has been followed thereafter in most countries, includingaccording to the above reasoning, the power in the Courts to declare a Statute unconstitutional has to be accepted, the question which then arises is how and when should such power be exercised.36. This is a very important question because invalidating an Act of the Legislature is a grave step and should never be lightly taken.The Court is, therefore, faced with a grave problem. On the one hand, it is well settled since Marbury vs. Madison (supra) that the Constitution is the fundamental law of the land and must prevail over the ordinary statute in case of conflict, on the other hand the Court must not seek an unnecessary confrontation with the legislature, particularly since the legislature consists of representatives democratically elected by the people.We have observed above that while the Court has power to declare a statute to be unconstitutional, it should exercise great judicial restraint in this connection. This requires clarification, since, sometimes Courts are perplexed as to whether they should declare a statute to be constitutional or unconstitutional.Thus, according to Prof. Thayer, a Court can declare a statute to be unconstitutional not merely because it is possible to hold this view, but only when that is the only possible view not open to rational question. In other words, the Court can declare a statute to be unconstitutional only when there can be no manner of doubt that it is flagrantly unconstitutional, and there is no way of avoiding such decision. The philosophy behind this view is that there is broad separation of powers under the Constitution, and the three organs of the State - the legislature, the executive and the judiciary, must respect each other and must not ordinarily encroach into each others domain. Also the judiciary must realize that the legislature is a democratically elected body which expresses the will of the people, and in a democracy this will is not to be lightly frustrated or obstructed.42. Apart from the above, Thayer also warned that exercise of the power of judicial review "is always attended with a serious evil", namely, that of depriving people of "the political experience and the moral education and stimulus that comes from fighting the question out in the ordinary way, and correcting their own errors" and with the tendency "to dwarf the political capacity of the people and to deaden its sense of moral responsibility".In our opinion, there is one and only one ground for declaring an Act of the legislature (or a provision in the Act) to be invalid, and that is if it clearly violates some provision of the Constitution in so evident a manner as to leave no manner of doubt. This violation can, of course, be in different ways, e.g. if a State legislature makes a law which only the Parliament can make under List I to the Seventh Schedule, in which case it will violate Article 246(1) of the Constitution, or the law violates some specific provision of the Constitution (other than the directive principles). But before declaring the statute to be unconstitutional, the Court must be absolutely sure that there can be no manner of doubt that it violates a provision of the Constitution. If two views are possible, one making the statute constitutional and the other making it unconstitutional, the former view must always be preferred. Also, the Court must make every effort to uphold the constitutional validity of a statute, even if that requires giving a strained construction or narrowing down its scope vide Mark Netto vs. Government of Kerala and others AIR 1979 SC 83 (para 6). Also, it is none of the concern of the Court whether the legislation in its opinion is wise or unwise.In our opinion judges must maintain judicial self-restraint while exercising the power of judicial review of legislation. "In view of the complexities of modern society", wrote Justice Frankfurter, while Professor of Law at Harvard University, "and the restricted scope of any mans experience, tolerance and humility in passing judgment on the worth of the experience and beliefs of others become crucial faculties in the disposition of cases. The successful exercise of such judicial power calls for rare intellectual disinterestedness and penetration, lest limitation in personal experience and imagination operate as limitations of the Constitution.In our opinion adjudication must be done within the system of historically validated restraints and conscious minimization of the judges personal preferences. The Court must not invalidate a statute lightly, for, as observed above, invalidation of a statute made by the legislature elected by the people is a grave step.In our opinion, the Court should, therefore, ordinarily defer to the wisdom of the legislature unless it enacts a law about which there can be no manner of doubt about its unconstitutionality.The Court must, therefore, make every effort to uphold the constitutional validity of a Statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the Court declare a statute to be unconstitutional.However, though while considering economic or most other legislation the Court gives great latitude to the legislature when adjudging its constitutionality, a very different approach has to be adopted by the Court when the question of civil liberties and the fundamental rights under Part III of the Constitution arise.74. In paragraph 8 of the Constitution Bench decision in R.K. Gargs case (supra) it was observed (as quoted above) that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, freedom of religion etc. Thus, the Constitution Bench decision in R.K Gargs case (supra) is an authority for the proposition which has been stated herein, namely, when a law of the legislature encroaches on the civil rights and civil liberties of the people mentioned in Part III of the Constitution (the fundamental rights), such as freedom of speech, freedom of movement, equality before law, liberty, freedom of religion etc, the Court will not grant such latitude to the legislature as in the case of economic measures, but will carefully scrutinize whether the legislation on these subjects is violative of the rights and liberties of the citizens, and its approach must be to uphold those rights and liberties, for which it may sometimes even have to declare a statute to be unconstitutional.However, we find no paradox at all. As regards economic and other regulatory legislation judicial restraint must be observed by the Court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the Court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialization when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the Court to encroach into the domain of the executive or legislative and try to enforce its own views and perceptions.In our opinion, therefore, while Judges should practice great restraint while dealing with economic statutes, they should be activist in defending the civil liberties and fundamental rights of the citizens. This is necessary because though ordinarily the legislature represents the will of the people and works for their welfare, there can be exceptional situations where the legislature, though elected by the people may violate the civil liberties and rights of the people. It was because of this foresight that the Founding Fathers of the Constitution in their wisdom provided fundamental rights in Part III of the Constitution which were modeled on the lines of the U.S. Bill of Rights of 1791 and the Declaration of the Rights of Man during the Great French Revolution of 1789.In view of the fact that the impugned amendment is an economic measure, whose aim is to plug the loopholes and secure speedy realization of stamp duty, we are of the opinion that the said amendment, being an economic measure, cannot be said to be unconstitutional.