2008 (2) TMI 850 - SC - VAT / Sales Tax

Amended Section 47A held constitutional; 50% deposit requirement for deficient stamp duty upheld as valid economic measure

Government of Andhra Pradesh & Ors Versus Smt. P. Laxmi Devi

SC upheld the constitutionality of the amended Section 47A of the Stamp Act requiring deposit of 50% of deficient stamp duty as a condition for reference ... Payment of stamp duty on a sale deed - application of Thayer's Doctrine - Whether Section 47A of the Indian Stamp Act as amended by A.P. Act 8 of 1998 which requires a party to deposit 50% deficit stamp duty as a condition precedent for a reference to the Collector u/s 47A is unconstitutional? Held that:- It is only when there is no manner of doubt that the Statute is unconstitutional that it should be declared to be so. However, even reasonable men can sometimes differ as to whether there is a doubt or not about the constitutional validity. In other words, sometimes there can be a doubt whether there is a doubt at all. About some statutes there can be no doubt that they are unconstitutional e.g. if discriminatory treatment is given to redheads, or if a statute excluded owners of a certain make of motor vehicle from voting in a general election. However, there are other statutes about which one cannot be absolutely sure about their constitutional validity, and difficulties would then arise in this connection. 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. It may be mentioned that during feudal times citizens had no civil rights. There was no freedom of speech, no equality, no freedom to practice one's own religion, no liberty etc. The Great English Revolution of 1688 emphasized the importance of liberty and the Great French Revolution of 1789 underscored equality and freedom of religion. The Great American Revolution championed all these rights. Our founding fathers borrowed these lessons from history and provided for the fundamental rights in our Constitution to protect the citizens' liberties not only against the executive but even against the legislature, if need be. It must be understood that while a statute is made by the peoples' elected representatives, the Constitution too is a document which has been created by the people (as is evident from the Preamble). The Courts are guardians of the rights and liberties of the citizens, and they will be failing in their responsibility if they abdicate this solemn duty towards the citizens. For this, they may sometimes have to declare the act of the executive or legislature as unconstitutional. 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. This appeal is allowed and the impugned judgment is set aside and the constitutional validity of the amended Section 47A of the Stamp Act is upheld. Issues Involved:1. Constitutionality of Section 47A of the Indian Stamp Act as amended by A.P. Act 8 of 1998.2. Requirement of depositing 50% of the deficit stamp duty for a reference to the Collector.3. Judicial review of statutes and the doctrine of judicial restraint.Detailed Analysis:1. Constitutionality of Section 47A of the Indian Stamp Act as amended by A.P. Act 8 of 1998:The Andhra Pradesh High Court declared Section 47A of the Indian Stamp Act, as amended by A.P. Act 8 of 1998, unconstitutional. The Supreme Court, however, disagreed with this view. It held that the amendment was within the legislative competence of the State Legislature under Entry 63 of List II read with Entry 44 of List III of the Seventh Schedule to the Constitution. The amendment aimed to plug loopholes and ensure quick realization of stamp duty, which is a legitimate objective.The Supreme Court emphasized that stamp duty is a tax, and hardship is not relevant in construing taxing statutes, which are to be construed strictly. The Court noted that if the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. The High Court erred 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 1998.2. Requirement of depositing 50% of the deficit stamp duty for a reference to the Collector:The High Court had observed that the imposition of a deposit of 50% of the differential stamp duty for referring the document to the Collector was beyond the object and intendment of the statutory provision. It held that this requirement offended the equal protection of laws guaranteed under Article 14 of the Indian Constitution and was thus arbitrary.The Supreme Court, however, held that the proviso to Section 47A, which required the deposit of 50% of the deficit duty, was constitutionally valid. It reasoned that the registering officer, being a public officer, is mandated to impound documents not duly stamped under Section 33(1) of the Stamp Act. The Court stated that there is no discretion in the authority to impound a document or not, and the word 'shall' in Section 33(1) is mandatory. The provision for depositing 50% of the deficit duty was seen as a measure to ensure compliance and prevent evasion of stamp duty.3. Judicial review of statutes and the doctrine of judicial restraint:The Supreme Court delved into the theory of judicial review of statutes, emphasizing the doctrine of judicial restraint. It highlighted that invalidating a statute is a grave step and should be taken only in very rare and exceptional circumstances. The Court referred to the views of eminent jurists like Kelsen and Thayer, who advocated for judicial self-restraint and deference to legislative judgment, especially in economic matters.The Court noted that while it has the power to declare a statute unconstitutional, this power should be exercised with great restraint. It should only declare a statute unconstitutional if it clearly violates some provision of the Constitution in an evident manner. 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.The Supreme Court also mentioned that while greater latitude is given to economic and tax measures, a different approach is adopted when it comes to civil liberties and fundamental rights under Part III of the Constitution. In such cases, the Court must carefully scrutinize whether the legislation violates the rights and liberties of the citizens.Conclusion:The Supreme Court upheld the constitutional validity of Section 47A of the Indian Stamp Act as amended by A.P. Act 8 of 1998. It emphasized the importance of judicial restraint in the review of statutes and highlighted the necessity of ensuring compliance with tax laws to prevent evasion and ensure quick realization of revenue. The appeal was allowed, and the judgment of the High Court declaring the provision unconstitutional was set aside.