2025 (4) TMI 428 - HC - Indian Laws

Official Liquidator sale certificates attract only 5% stamp duty plus 1% registration charges, enhanced duty demand quashed

M/s. Vijayalakshmi Marketing Versus State of Tamil Nadu and Others

The Madras HC allowed an appeal against a Sub-Registrar's demand for enhanced stamp duty on a sale certificate issued after public auction by an Official ... Demand for enhanced stamp duty by the Sub-Registrar on the sale certificate - wilful undervaluation of the property under Section 47-A of the Indian Stamp Act - Property was sold by the Official Liquidator in a public auction (E-Auction) - HELD THAT:- The issue relating to payment of stamp duty on sale certificate is no longer res-integra. In Bell Tower Enterprises LLP, Rep. by its Managing Partner Vs. State of Tamil Nadu, Rep. by its Secretary to Government, [2022 (9) TMI 1504 - MADRAS HIGH COURT], after referring all the precedents on the issue of stamping of sale certificate had held that the stamp duty payable on the sale certificate is only 5% and the registration charges payable is 1% and had observed that 'conveyance would apply to a Sale Certificate also. Under Article 23 of the Stamp Act, the Stamp Duty payable on a sale is 5% as per G.O.Ms.No.46, CT and All Department dated 27.03.2012.' The said judgment was also followed by another learned Single Judge of this Court in N.C. Suresh Kumar and another Vs. Inspector General of Registration [2023 (8) TMI 1632 - MADRAS HIGH COURT]. Therefore, the demand made by the Sub-Registrar that the petitioner must pay enhanced stamp duty is not justified. As regards the reference made under Section 47-A of the Stamp Act we are constrained to hold that such a reference is not authorized by Section 47-A. The Hon'ble Supreme Court in Registrar of Assurances and another Vs. ASL VYAPAR Private Ltd. & another [2022 (11) TMI 1385 - SUPREME COURT] after referring to the earlier judgment in V.N. Devadass Vs. Chief Revenue Control Office -cum-Inspector and others [2009 (5) TMI 967 - SUPREME COURT] held that a reference under Section 47-A cannot be resorted, where a sale is by public auction by the officers appointed by the Court. Conclusion - The demand for enhanced stamp duty is unlawful, the reference under Section 47-A is unauthorized, and the petitioner is entitled to a refund of the excess duty paid with interest. The order of the learned Single Judge dismissing the writ petition is set aside. The demand made by the sub-Registrar is also set aside. The 47-A proceedings are quashed - Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include: Whether the demand for enhanced stamp duty by the Sub-Registrar on the sale certificate was justified under the Indian Stamp Act, 1899. Whether the reference made under Section 47-A of the Indian Stamp Act for undervaluation of the property was authorized and appropriate in the context of a public auction. Whether the petitioner is entitled to a refund of the excess stamp duty and registration charges paid under protest.ISSUE-WISE DETAILED ANALYSIS1. Demand for Enhanced Stamp Duty Relevant Legal Framework and Precedents: The demand for enhanced stamp duty was based on Article 18 read with Article 23 of Schedule-I to the Indian Stamp Act, 1899, which treats a sale certificate as a conveyance for the purpose of stamp duty. However, G.O.Ms.No.46 of Commercial Taxes and All Department dated 27.03.2012, issued under Section 9 of the Indian Stamp Act, remitted the duty on sale certificates to 5%. Court's Interpretation and Reasoning: The Court noted that the petitioner had paid the correct stamp duty of 5% and 1% registration charges as per the government order. The demand for higher duty by the Sub-Registrar was deemed unjustified. Key Evidence and Findings: The Court referenced previous judgments, including Bell Tower Enterprises LLP v. State of Tamil Nadu, which established that the stamp duty on sale certificates is 5% and registration charges are 1%. Application of Law to Facts: The Court applied the legal framework to conclude that the petitioner had complied with the applicable duty requirements, and the Sub-Registrar's demand was not supported by law. Treatment of Competing Arguments: The Court dismissed the Sub-Registrar's argument for higher duty, referencing the Supreme Court's decision in Esjaypee Impex Pvt Ltd v. Canara Bank, which clarified the non-compulsory registration of sale certificates under certain conditions. Conclusions: The Court concluded that the demand for enhanced stamp duty was unlawful and the petitioner was entitled to a refund of the excess amount paid.2. Reference under Section 47-A of the Indian Stamp Act Relevant Legal Framework and Precedents: Section 47-A of the Indian Stamp Act deals with the procedure for dealing with undervaluation of property. The Supreme Court in Registrar of Assurances v. ASL VYAPAR Private Ltd. clarified that Section 47-A does not apply to public auctions conducted under court supervision. Court's Interpretation and Reasoning: The Court reasoned that the reference under Section 47-A was unauthorized since the sale was conducted through a public auction by the Official Liquidator, which is considered a transparent method of obtaining market value. Key Evidence and Findings: The Court cited the Supreme Court's observation that a public auction is one of the most transparent methods for property sale, and the Registering Authority should not reassess the market price determined by such auctions. Application of Law to Facts: The Court applied the Supreme Court's interpretation to conclude that the reference under Section 47-A was inappropriate and should be quashed. Treatment of Competing Arguments: The Court dismissed the Sub-Registrar's reference under Section 47-A, aligning with the Supreme Court's stance on public auction sales. Conclusions: The Court concluded that the reference under Section 47-A was unwarranted and quashed the proceedings.SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court quoted the Supreme Court's decision: 'We are, thus, of the view that this reference is required to be answered by opining that in case of a public auction monitored by the court, the discretion would not be available to the Registering Authority under Section 47A of the Act.' Core Principles Established: The judgment reinforced the principle that sale certificates issued through court-supervised auctions are not subject to enhanced stamp duty demands or undervaluation proceedings under Section 47-A. Final Determinations on Each Issue: The Court determined that the demand for enhanced stamp duty was unlawful, the reference under Section 47-A was unauthorized, and the petitioner was entitled to a refund of the excess duty paid with interest.The writ appeal was allowed, the order of the learned Single Judge dismissing the writ petition was set aside, the demand made by the Sub-Registrar was quashed, and the petitioner was directed to receive a refund of the excess duty paid with interest. Additionally, the Sub-Registrar was directed to return the registered sale deed within fifteen days.