TaxTMI 
TaxTMI 
2008 (2) TMI 850
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....ions 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 Government's 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....
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.... 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 quoted below : "In reply to the allegations made in the affidavit it is submitted that a sale deed was executed by I....
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....f 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 fo....
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.... such instrument is not duly stamped, impound the same". 16. A perusal of the said provision shows that when a document is produced (or comes in the performance of his functions) before a person who is authorized to receive evidence and a person who is in charge of a public office (except a police officer) before whom any instrument chargeable with duty is produced or comes in the performance of his functions, it is the duty of such person before whom the said instrument is produced to impound the document if it is not duly stamped. The use of the word 'shall' in Section 33(1) shows that there is no discretion in the authority mentioned in Section 33(1) to impound a document or not to do so. In our opinion, the word 'shall' in Section 33(1) does not mean 'may' but means `shall'. In other words, it is mandatory to impound a document produced before him or which comes before him in the performance of his functions. Hence the view taken by the High Court that the document can be returned if the party does not want to get it stamped is not correct. 17. In our opinion, a registering officer under the Registration Act (in this case the Sub-Registrar) is ....
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....adar AIR 1968 SC 623 (vide paragraph 23 to 28) that where the language of a taxing provision is plain, the Court cannot concern itself with the intention of the legislature. Hence, in our opinion the High Court erred in its approach of trying to find out the intention of the legislature in enacting the impugned amendment to the Stamp Act. 22. In this connection we may also mention that just as the reference under Section 47A has been made subject to deposit of 50% of the deficit duty, similarly there are provisions in various statutes in which the right to appeal has been given subject to some conditions. The constitutional validity of these provisions has been upheld by this Court in various decisions which are noted below. 23. In Gujarat Agro Industries Co. Ltd. vs. Municipal Corporation of the city of Ahmedabad and Ors. 1999(4) SCC 468, this Court referred to its earlier decision in Vijay Prakash D. Mehta vs. Collector of Customs (Preventive) 1968(4) SCC 402 wherein this Court observed : "The right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right ....
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....n Rs.1 crore instead of demanding duty on Rs. 10 lacs. A party may not be able to pay this exorbitant duty demanded under the proviso to Section 47A by the registering officer in such a case. What can be done in this situation? 29. 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 v....
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....archy, 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 Marbury vs. Madison 5 U.S. (1Cranch) 137 (1803). This principle has been followed thereafter in most countries, including India. B. How and when should the power of the Court to declare the Statute unconstitutional be exercised? Since, according 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. As observed by the American Jurist Alexander Bickel "judicial review is a counter majoritarian force in our system, since when the Supreme Court declares unconstitutional a legislative Act or the act of an elected executive, it thus thwarts the will of the repre....
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....r about its meaning and application. In short, a Constitution offers a wide range for legislative discretion and choice. The judicial veto is to be exercised only in cases that leave no room for reasonable doubt. This rule recognizes that, having regard to the great, complex ever-unfolding exigencies of government, much which will seem unconstitutional to one man, or body of men, may reasonably not seem so to another; that the Constitution often admits of different interpretations; that there is often a range of choice and judgment; that in such cases the Constitution does not impose upon the legislature any one specific opinion, but leaves open this range of choice; and that whatever choice is not clearly in violation of a constitutional provision is valid even if the Court thinks it unwise or undesirable. Thayer traced these views far back in American history, finding, for example, that as early as 1811 the Chief Justice of Pennsylvania had concluded: "For weighty reasons, it has been assumed as a principle in constitutional construction by the Supreme Court of the United States, by this Court, and every other Court of reputation in the United States, that an Act of the legislatu....
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....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. 45. In a dissenting judgment in Bartels vs. Iowa 262 US 404 412(1923), Justice Holmes while dealin....
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....ar too wise to gamble for Utopia or nothing to be fooled by its own romantic verbiage. Above all, it knows that none of the numerous clashing social forces is apt to be completely without both vice and virtue. By give and take, the legislative process seeks not final truth, but an acceptable balance of community interests. In this view the harmonizing and educational function of the process itself counts for more than any of its legislative products. To intrude upon its pragmatic adjustments by judicial fiat is to frustrate our chief instrument of social peace and political stability. Second, if the Supreme Court is to be the ultimate policy-making body without political accountability how is it to avoid the corrupting effects of raw power? Can the Court avoid the self-inflicted wounds that have marked other episodes of judicial imperialism? Can the Court indeed satisfy the expectations it has already aroused? A third cluster of questions involves the competence of the Supreme Court as a legislative body. Can any nine men master the complexities of every phase of American life which, as the post 1961 cases suggest, is now the Court's pr....
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....sed in memorable language: "It is a misfortune if a judge reads his conscious or unconscious sympathy with one side or the other prematurely into the law, and forgets that what seem to him to be first principles are believed by half his fellow men to be wrong." (See Frankfurter's 'Mr. Justice Holmes and the Supreme Court') 49. In our opinion the legislature must be given freedom to do experimentations in exercising its powers, provided of course it does not clearly and flagrantly violate its constitutional limits. 50. As observed by Mr. Justice Brandeis of the U.S. Supreme Court in his dissenting judgment in New State Ice Co. vs. Liebmann 285 U.S. 262 (310-11) : "The discoveries in physical science, the triumphs in invention, attest the value of the process of trial and error. In large measure, these advances have been due to experimentation There must be power in the States and the Nation to re-mould, through experimentation, our economic practices and in situations to meet changing social and economic needs. To stay experime....
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....statute made by the legislature elected by the people is a grave step. As observed by this Court in State of Bihar vs. Kameshwar Singh AIR 1952, SC 252(274) : "The legislature is the best judge of what is good for the community, by whose suffrage it comes into existence". 55. 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. 56. As observed by the Constitution Bench decision of this Court in M.H. Quareshi vs. State of Bihar AIR 1958 SC 731 (vide para 15) : "The Court must presume that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. It must be borne in mind that the legislature is free to recognize degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest, and finally that in order to sustain the presumption of constitutionality the Court may take into consideration matters of common knowledge, common report, the history of the ....
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....m who attacks it to show that there has been a clear transgression of the constitutional principles. A clear enunciation of this latter doctrine is to be found in Middleton vs. Texas Power and L. Company, (248 U.S. 152 and 157), in which the relevant passage runs as follows : It must be presumed that a legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by expression and that its discriminations are based upon adequate grounds." (emphasis supplied) and this view has been consistently followed thereafter. 59. Thus in M/s. B.R. Enterprises vs. State of U.P. and others AIR 1999 SC 1867 this Court observed : "Another principle which has to be borne in mind in examining the constitutionality of a statute is that it must be assumed that the legislature understands and appreciates the need of the people and the laws it enacts are directed to problems which are made manifest by experience and that the elected representatives assembled in a legislature enact laws which they consider to be reasonable for the purpose for which they are enacted. Presumption is, therefore, in favour of the constitution....
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....one construction being given the statute will become ultra vires the powers of the legislature whereas on another construction which may be open, the statute remains effective and operative, then the Court will prefer the latter, on the ground that the legislature is presumed not to have intended an excess of jurisdiction". (emphasis supplied) 61. In State of Bihar and others vs. Bihar Distillery Ltd. AIR 1997 SC 1511 (vide para 18) a Constitution Bench of this Court observed : "The approach of the Court, while examining the challenge to the constitutionality of an enactment, is to start with the presumption of constitutionality. The Court should try to sustain its validity to the extent possible. It should strike down the enactment only when it is not possible to sustain it. The Court should not approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. Indeed, any such defects of drafting should be ironed out as part of the attempt to sustain the validity/constitutionality of the enactment. After all, an Act made by the Legislature represents the will of the people and that cannot be lightly interfered wi....
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.... It is only when all efforts to do so fail should the Court declare a statute to be unconstitutional. D. Some difficulties in the practical application of Thayer's Doctrine: After laying down the above broad principles in relation to the Thayer doctrine of Judicial Review of Statutes (which we respectfully agree with) we may now consider some practical difficulties which arise in this connection. 66. As stated above, 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. 67. Some broad principles to resolve these di....
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....ecy based on meagre and uninterrupted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what may one call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company, be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court....
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....ntral Reig Refining Co. (1949) 338 U.S. 604 (617): 94 Law Ed. 381-292, Mr. Justice Frankfurter of the U.S. Supreme Court observed: "Congress was ... confronted with the formulation of policy peculiarly within its wide swath of discretion. It would be a singular intrusion of the judiciary into the legislative process to extrapolate restrictions upon the formulation of such an economic policy from those deeply rooted notions of justice which the Due Process Clause expresses ." 73. 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. Garg's 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 Garg's case (supra) is an authority for t....
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....e further observed that reasonable men might think the impugned statute is a proper measure to ensure the health of the workers, and hence it was well within the power of the legislature to enact it. To use his own words in the judgment, "The Fourteenth Amendment (to the U.S. Constitution) does not enact Mr. Herbert Spencer's Social Statics". 78. However, when it came to civil liberties, Mr. Justice Holmes was an activist Judge. Thus, in Schenck vs. U.S. 249 U.S. 47 (1919) he laid down his famous "clear and present danger" test for deciding whether restriction on free speech was constitutionally valid. As Mr. Justice Holmes observed, the question in every case is "whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about substantive evils that Congress has a right to prevent". 79. We respectfully endorse the view of Mr. Justice Holmes, as stated above. 80. In Abrams vs. U.S. 250 U.S. 616 624 (1919), Mr. Justice Holmes observed : "Persecution for the expression of opinions seems to me perfectly logical. If yo....
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....s to be truly democratic, the process by which they are reached must give as much free play as possible for the transmutation of present minorities into future majorities by the unencumbered operation of freedom of thought, communication, and discussion. From this point of view, reasonably equal access to the political processes and reasonably uninhibited freedom to argue and discuss (limited only by imminently impending danger to the state itself) is in fact an integral part of, although antecedent to, the formal legislative processes of democracy. Hence to uphold the restrictions on freedom of thought and communication and access to the political processes which may be placed in effect by a temporary majority would be actually to reduce the integrity of the processes of transforming that transient majority into a minority - a processes essential to the very concept of democracy. Professor Chafee years ago remarked the fact that the Justices, including Holmes, who tended to uphold wide legislative control over business were often the very same men who tended to invalidate wide legislative control over discussion. "These Justices", said Chafee, "know that statutes, to be sound and ....
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....gislature as unconstitutional. 87. In Terminiello vs. Chicago 337 US 1 (1949), the U.S. Supreme Court observed that free speech may best serve its high purpose when it induces a condition of unrest, creates dissatisfaction with conditions as they are, even stirs people to anger. 88. In Bridges vs. California 314 US 252 (1941) the U.S. Supreme Court observed that freedom of the press must be allowed the broadest scope compatible with the supremacy of order. 89. In Wood vs. Georgia 370 U.S. 375(1962), the U.S. Supreme Court observed that Judges may use their contempt power to punish disorder in the courtroom, but not to penalize any editor who assails the performance of the Court in print. 90. In Ghani vs. Jones (1970) 1 Q.B. 693 (709) Lord Denning observed: "A man's liberty of movement is regarded so highly by the law of England that it is not to be hindered or prevented except on the surest ground." 91. The above observation has been quoted with approval by a Constitution Bench decision of this Court in Maneka Gandhi vs. Union of India, AIR 1978 SC 597 (vide para 99). 92. Why is it that the Courts both in India and in America have taken an activist approach....