Chief Controlling Revenue Authority and Superintendent of Stamps vs Maharashtra Sugar Mills Ltd
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: Supreme Court of India
Case Number: Civil Appeal No. XII of 1950
Decision Date: 27 May 1950
Coram: Hiralal J. Kania, Saiyid Fazal Ali, Mehr Chand Mahajan, B.K. Mukherjea
In this case the Supreme Court of India considered an appeal filed on 27 May 1950 by the Chief Controlling Revenue Authority together with the Superintendent of Stamps against Maharashtra Sugar Mills Ltd. The judgment was authored by Justice Hiralal J. Kania, who sat with Justices Saiyid Fazal Ali, Mehr Chand Mahajan and B. K. Mukherjea. The parties were identified as follows: the petitioner was the Chief Controlling Revenue Authority and the Superintendent of Stamps, while the respondent was Maharashtra Sugar Mills Ltd. The appeal was recorded as Civil Appeal No. XII of 1950 and arose from a judgment and order of the High Court of Judicature at Bombay dated 2 September 1947, which had been delivered by Acting Chief Justice Chagla and Justice Bhagwati in Appeal No. 60 of 1946. The factual background of the dispute had been fully set out in the High Court’s decision. Counsel appearing for the petitioner included the Advocate-General of Bombay, C. K. Daphtary, assisted by M. M. Desai. Representing the respondent were the Attorney-General for India, M. C. Setalvad, and his junior S. S. Ragnakar.
The principal issue before the Court concerned the scope of the power conferred on the Chief Controlling Revenue Authority by sections 57 and 59(2) of the Indian Stamp Act, 1899. The Court examined whether the authority’s power to refer a matter to the High Court for opinion was intended solely for the benefit of the revenue administration or whether it also extended to the party affected by the stamp assessment. The Court held that the statutory power was not confined to the revenue authority alone; it was expressly coupled with a duty to make a reference when the affected party requested it. Consequently, if the authority declined to refer, the High Court possessed the jurisdiction to direct the authority to discharge that duty. The Court relied on the decisions of Alcock Ashdown & Co. Ltd. v. Chief Revenue Authority (51 I.A. 227) and Julius v. Bishop of Oxford (5 A.C. 214) to support this view.
Furthermore, the Court addressed whether an order directing the revenue officer to perform his duty constituted an exercise of original jurisdiction in a “matter concerning revenue” within the meaning of section 226 of the Government of India Act, 1935. It concluded that such an order did not amount to original jurisdiction and therefore was not barred by section 226. The Court also rejected the argument that the proceedings having progressed beyond the stage of enforcing payment precluded the High Court from ordering a reference. It observed that even after the enforcement stage, a reference under section 57 remains permissible, and if the High Court’s opinion on the reference is adverse to the revenue authority, the authority must refund any excess amount recovered, pursuant to section 59(2) of the Stamp Act.
In the appeal decided on 27 May 1950, the judgment was delivered by Chief Justice Kania. The appeal arose from a judgment of the High Court at Bombay and concerned whether the Court possessed jurisdiction to direct the Chief Controlling Revenue Authority and the Superintendent of Stamps at Bombay to state a case for the Court’s opinion under section 57 of the Stamp Act.
The respondent, a corporate entity, had obtained a loan from the Central Bank of India Ltd., Bombay, for its business operations. To secure the loan, the parties executed a deed on 22 March 1945. The deed bore a stamp duty of Rs 16-8-0 and was presented as a deed of hypothecation without possession of the goods. When the deed was forwarded to the Sub-Registrar for registration, the Sub-Registrar impounded it and transmitted it to the Stamp Office for further scrutiny. The Assistant Superintendent of Stamps subsequently wrote to the respondent, asserting that the deed constituted a mortgage with possession, that it was chargeable with duty under article 40(a) of the Schedule, and enquiring why it had not been duly stamped prior to execution. In reply, the respondent’s counsel contended that the instrument was not, and had never been intended to be, a mortgage with possession. They emphasized that no possession of the property had been transferred or intended to be transferred, except in limited contingencies, and therefore maintained that the deed had been properly stamped. The Assistant Superintendent then informed the respondent that the instrument was chargeable with a duty of Rs 56,250 and that a penalty of Rs 5,000 had been imposed, and he demanded that the amount be paid immediately.
On 27 July 1945 the respondent instituted a suit against the Central Bank, alleging that the instrument was not a mortgage with possession. The suit sought the Court’s directions on the construction of the document and, if the Court found that the instrument as drafted failed to reflect the parties’ common intention, requested that the instrument be rectified. On 9 August 1945 the respondent’s counsel wrote to the Assistant Superintendent to inform him of the filing of the suit and to request that the demand for stamp duty and penalty not be pursued in view of the pending litigation. Subsequent correspondence, on behalf of the appellant, reiterated the demand and warned that the coercive provisions of section 48 of the Stamp Act might be invoked. The Collector then issued a letter on 17 January 1946 demanding payment of the duty and penalty. The suit was concluded on 25 January 1946, when the Court ordered the rectification prayed for in the suit. Immediately after the judgment, the respondent’s counsel notified the Assistant Superintendent of the court’s decision, transmitted a copy of the deed showing the rectifications effected, and sent a similar notice to the Collector of Bombay.
On 1 February 1946 the respondent’s solicitors wrote to the Assistant Superintendent of Stamps asking whether he would be prepared to make a reference under section 56(2) of the Stamp Act to the appellant, because the question of liability for the stamp duty and the penalty raised important questions of law. Subsequently, on 5 February the respondent filed a petition against the appellant. In that petition it was prayed that either the order of the Assistant Superintendent of Stamps should be rescinded, or, in the alternative, that the matter be referred under section 57 of the Stamp Act for the opinion of the High Court. The petition was dismissed on 4 July 1946. Following that dismissal, the respondent lodged another petition in the High Court on 19 July 1946. In that petition the respondent sought a writ of certiorari against the appellant, or an order under section 45 of the Specific Relief Act to cancel the levy of stamp duty and penalty claimed by the appellant; alternatively, the petition asked that the appellant be directed under section 57 of the Stamp Act to refer the dispute to the High Court for its opinion.
The petition was heard before Mr Justice Blagden. Justice Blagden declined to grant the first relief sought, but he directed the appellant to state a case under section 57 of the Stamp Act and to forward that case to the Court for its opinion. The appellant appealed this direction, but the appeal was unsuccessful. The appellant thereafter appealed to this Court. Two questions were raised on the appellant’s behalf. The first question was whether section 57 of the Stamp Act imposes an obligation on the appellant to state a case, and, if it does not impose such an obligation, whether the High Court possessed jurisdiction to issue a direction to that effect. The second question was whether, having regard to section 226(1) of the Government of India Act, 1935, the High Court had jurisdiction to order the appellant to state the case, the matter being one that related to revenue. It was further contended that the dispute had moved beyond the stage of assessment and had entered the stage of recovery; therefore, the High Court of Bombay, according to the appellant, lacked jurisdiction to pass the order it had made. For reference, the material part of section 57 of the Stamp Act reads as follows: “57. (1) The Chief Controlling Revenue-authority may state any case referred to it under section 56, sub-section (2), or otherwise coming to its notice, and refer such case, with its own opinion thereon… (b) if it arises in the province of Bombay, to the High Court at Bombay…”. Section 226(1) of the Government of India Act, 1935 states: “226. (1) Until otherwise provided by an Act of the appropriate legislature, no High Court shall have any original jurisdiction in any matter concerning the revenue, or concerning any act ordered or done…”.
The appellant argued that the language of section 57 of the Stamp Act merely conferred a power on the appellant to state a case, and did not impose an obligation to do so. According to that argument, the provision was drafted specifically to benefit the appellant and not any other party, and the use of the word “may” was intentional to reflect that discretionary character. The appellant further pointed out that under section 56(2) of the Stamp Act, when the Collector was uncertain about the duty payable on an instrument, the Collector could draw up a statement of the case and forward it, together with his opinion, to the Chief Controlling Revenue Authority for a decision. In a similar vein, section 60 authorized a Court, if it doubted the duty amount, to prepare a statement of case for the opinion of the High Court. The appellant contended that both of these sections granted only a power to the Collector and to the Court for their own benefit, and that section 57 was fashioned on the same principle for the benefit of the appellant. The appellant emphasized that, under none of these provisions, any other party possessed a right to demand a reference. Moreover, the appellant highlighted that the Stamp Act allowed a Collector to certify that a document was properly stamped even when, on a correct construction, it was not sufficiently stamped; in such circumstances the Controlling Authority could not intervene and did not have the power to refer the matter to the Court to demand a higher stamp duty. For these reasons, the appellant asserted that the scheme of the Stamp Act differed materially from the scheme of the Income Tax Act.
The Court found the appellant’s contentions to be unsound. The Court observed that the first contention—that section 57 gave only discretion and did not impose a duty on the appellant to make a reference—overlooked the fact that the appellant was required to make a reference whenever it was in doubt about its own decision or conclusion. The Court noted that the party liable to pay the assessed stamp duty was materially interested in the outcome, and that the appellant’s decision was not necessarily based solely on the entries in the Schedule to the Stamp Act. In the instant case, the determination of the item under which stamp duty was leviable depended on the true construction of the document, and it also involved deciding the effect of the Court’s order directing rectification of the instrument. The Court held that it was not sound, as a principle, to leave such difficult questions to the appellant’s final decision while denying any remedy to the party affected by the assessment. The Court further observed that the construction of a document was not always easy and, because it often raised substantial questions of law, parties had been permitted to take the matter up to the highest Court. Consequently, the Court concluded that it would be inappropriate to assume that, merely because the matter arose under a Revenue Act, the appellant’s decision should be considered final and conclusive. The Court also rejected the appellant’s reliance on sections 56(2) and 60, stating that those provisions, which allowed the Collector and the Court to refer a statement of case when they themselves were in doubt, actually worked against the appellant’s contention that the power to refer was optional rather than obligatory.
The Court observed that if the assessment made under the Stamp Act were treated as final and conclusive, a party who was dissatisfied with that assessment would have no legal remedy at all. The Court noted that interpreting a document is often a complex task, and when the issue involves a substantial question of law, parties have been allowed to appeal to the highest Court. Consequently, it would be inappropriate to begin with the assumption that, merely because the matter concerns a Revenue Act, the decision of the revenue authority must be regarded as final and unchallengeable.
The Court further examined the effect of sections 56(2) and 60 of the Stamp Act, which empower the Collector and the Court to forward a statement of the case to the appellant and to the High Court respectively. In the Court’s view, these provisions did not support the appellant’s contention that his decision should be final; instead, they indicated that the authority could act when it itself harboured doubt that needed to be resolved. The Court pointed out that section 57 does not contain the words “feels doubt as to the amount of duty to be paid in respect of an instrument.” This omission, the Court held, demonstrated that the reference contemplated under section 57 was not intended solely for the benefit of the appellant but also to protect the interests of the party affected by the assessment. Accordingly, the Court concluded that the power conferred by section 57 operated in the nature of an obligation, or was coupled with an obligation, and therefore could be invoked by the parties who were subject to the stamp-duty assessment.
The Court’s reasoning was reinforced by reference to the Judicial Committee of the Privy Council decision in Alcock, Ashdown and Co. Ltd. v. Chief Revenue Authority, Bombay (50 I.A., 227). In that case, the issue concerned an assessee’s right to ask the Commissioner of Income Tax to state a case for the opinion of the Court under section 51 of the Indian Income Tax Act, 1918. The relevant portion of that provision read as follows:
“51. (1) If, in the course of any assessment under this Act or any proceeding in connection therewith other than a proceeding under Chapter VII, a question has arisen with reference to the interpretation of any of the provisions of this Act or of any rule thereunder, the Chief Revenue Authority may, either on its own motion or on reference from any Revenue officer subordinate to it, draw up a statement of the case, and refer it, with its own opinion thereon, to the High Court, and shall so refer any such question on the application of the assessee, unless it is satisfied that the application is frivolous or that a reference is unnecessary. (3) The High Court upon the hearing of any such case shall decide the questions raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is rounded, and shall send to the Revenue authority by which the….”
The Court noted that in the Privy Council case, after the assessment was made and the matter reached the Commissioner of Income Tax, the assessee requested that a case be stated for the Court’s opinion under the aforesaid section, but the Commissioner refused. The High Court subsequently ordered the Chief Revenue Authority, Bombay, to show cause why a case should not be stated. The Privy Council ultimately examined the broader question of whether the Court possessed jurisdiction to compel the Commissioner to state a case for its opinion. This precedent, the Court held, supported the view that statutory powers to refer questions to a higher court are intended to serve the interests of both the revenue authority and the party affected by the assessment, rather than to render the revenue authority’s decision irrevocably final.
The Court explained that once a judgment is delivered, it must be sealed by the Court and signed by the Registrar, and a copy of that judgment must be sent to the Revenue Authority. The Revenue Authority is then required to dispose of the case in accordance with the judgment. If the case originated from a reference made by a subordinate Revenue officer, the Authority must forward a copy of the judgment to that officer, who must then dispose of the case in conformity with the judgment.
In the case under consideration, the assessment had been completed and the proceedings were before the Commissioner of Income Tax. The assessee applied for a statement of the case to be referred to the Court for its opinion under section 51 of the Indian Income Tax Act, 1918. The Commissioner declined to make such a statement. Consequently, the assessee obtained a rule from the High Court directing the Chief Revenue Authority of Bombay to show cause why a statement of the case should not be made.
The High Court was asked to consider whether it possessed jurisdiction to compel the Commissioner to state a case for the Court’s opinion. The Court at the High Court level limited the issue to whether, in the circumstances, the Revenue Authority had a duty to state a case. When the matter was appealed to the Judicial Committee of the Privy Council, the argument was broadened. The counsel for the respondent contended that even if the Authority had a duty, the Court could not obligate the Authority to exercise that duty. To support this contention, reliance was placed on the well-known principle that Indian legislation generally excludes revenue matters from the jurisdiction of ordinary civil courts, a principle illustrated in Spooner v. Juddow. Additionally, reference was made to section 106(2) of the Government of India Act, 1915.
The Privy Council delivered its judgment through Lord Phillimore, with Viscount Haldane and Lord Carson sitting on the Board. Lord Phillimore quoted the statutory provision, noting that although the Chief Revenue Authority may, if he thinks fit, draw up a statement of the case and refer it to the High Court, he is not bound to do so on the assessee’s application if he is satisfied that the application is frivolous or that a reference is unnecessary. The respondent argued that in the present case the Authority had satisfied itself that the application was frivolous and the reference unnecessary.
The High Court rejected that argument. The Privy Council agreed with the High Court, holding that the High Court’s construction of the statute was too narrow. The Privy Council observed that the last phrase of the clause must be taken first. If an assessee applies for a case to be stated, the Authority must do so unless it can demonstrate that the application is frivolous or unnecessary. The Authority is not permitted to wait for a court order to make the statement; failure to do so would constitute misfeasance and a breach of statutory duty.
Although the statutory provision creates a duty that would arise if the authority failed to act, the judgment did not rely solely on the language of section 51(1) of the Indian Income Tax Act, 1918. After noting this, the judgment proceeded to state: “Put that case aside. The rule here is supported upon the earlier part of the section.”
The Court observed that the earlier part of the section does not impose an obligation to state a case; it merely provides that the authority may do so. As the learned counsel for the respondent correctly pointed out, the word “may” does not carry the force of “shall.” Similarly, the expression “it shall be lawful” does not create a compulsory command. The provision therefore confers only a capacity or power on the Authority, not a mandatory duty.
However, the Court explained that when a public authority is given a capacity or power, certain circumstances may arise that couple that power with a duty to exercise it. To illustrate this principle, the judgment quoted the language of Lord Cairns in Julius v. Bishop of Oxford (1): “There may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed to exercise that power when called upon to do so.”
Applying this reasoning, the Court held that, assuming a serious point of law is at issue, a duty indeed arises upon the Chief Revenue Authority to state a case for the opinion of the Court. If the Authority fails to recognise that such a serious point exists, the Court possesses the power to control the Authority and to order it to state a case.
The Court acknowledged that the reasoning and conclusions expressed in the earlier judgment have lost some of their compelling force since the decision of 26 January 1950, yet they remain entitled to great respect. The Court further expressed full agreement with the line of reasoning and the conclusions reached in that earlier authority.
Regarding the present matter, the Court observed that the power to make a reference under section 57 is not exercised solely for the benefit of the appellant. Citing Julius v. Bishop of Oxford (1) A.C. 214, 222, the Court explained that the power is coupled with a duty imposed on the officer as a public servant to act correctly. When an important and intricate question of law concerning the construction of a document arises, the officer’s duty is to make the reference to the Court. Should the officer omit to do so, the Court has the authority to direct the officer to fulfil that duty and to refer the matter for judicial determination.
Mr Daphtary, appearing for the appellant, attempted to distinguish the present case by arguing that the scheme of the Income Tax Act differed from that of the Stamp Act. The Court, however, held that the observations quoted above, and the underlying principles, apply equally to the duty cast on the appellant under section 57 of the Stamp Act, and that any minor distinctions between the two statutes are immaterial for the purpose of the present discussion.
The Court observed that the principles and underlying policies that apply to the duty imposed on the appellant under section 57 of the Stamp Act are the same as those applicable in the earlier discussion, and that any minor distinctions between the schemes of the Income-Tax Act and the Stamp Act do not affect the present issue.
In the language of Lord Cairns, the very nature of the power conferred on the appellant and the conditions that require him to fix the amount of duty inevitably attach a duty to the power, namely, the duty to state a case for the opinion of the Court.
The Court further noted that the provisions of section 51(1) and clause (a) of the Stamp Act operate on the same principle as section 59 of that same Act.
Counsel for the appellant then argued that the two statutes differ because, when a Collector issues a certificate under section 32, even if the assessment is erroneous and detrimental to the State, neither the State nor the appellant has any remedy. The Court rejected this submission, holding that it disregards the specific provisions that empower the Collector to issue such a certificate.
To clarify the scheme of the Stamp Act, the Court briefly outlined its structure. Chapter II contains provisions dealing with the liability of instruments to duty, the timing of stamping, the valuation of duty, and the identification of the person by whom duty is payable.
Chapter III comprises only two sections and addresses adjudication concerning stamps. Section 31 provides that any instrument—whether executed, unexecuted, previously stamped or not—may be presented to the Collector with a request for his opinion on the duty chargeable. The applicant must pay a prescribed fee to obtain this opinion. The Collector is authorized to call for information and take evidence before determining the appropriate stamp duty and certifying, under section 32, that the full duty has been paid.
The Court emphasized that the party seeking the Collector’s opinion is naturally interested in obtaining that opinion and therefore cannot object to the Collector’s certificate. If the Collector himself doubts his assessment, section 56(2) empowers him to seek the opinion of the appellant. Consequently, with respect to the two provisions of Chapter III, no grievance can arise for either side.
From section 33 onward, Chapter IV and the succeeding Chapters V and VI contain provisions wherein the opinion of the Stamp Officer may conflict with that of the party responsible for paying the duty. These chapters, culminating in section 61, address situations arising from such differences of opinion, and section 57(1) falls squarely within this category.
Accordingly, the Court concluded that the appellant’s contention regarding the applicability of section 57(1) fails.
The final point raised before the Court concerned whether the High Court possessed jurisdiction to order the Revenue Authority to state a case, in view of the provisions of section 226 of the Government of India Act, 1935.
The appellant contended that the suit should be dismissed on two grounds. First, it was argued that because the dispute concerned a revenue matter, the jurisdiction of the Court was statutorily excluded. Second, it was submitted that the proceeding had moved beyond the assessment stage and was now in the stage of collection of stamp duty, and that on that basis the present case should be distinguished from the precedent set in Alcock’s case (1). The Court examined these submissions and held that the appellant’s argument failed. In the Court’s view, the claim that the Court could not entertain a revenue matter was unpersuasive, and the distinction sought on the basis of the procedural stage was likewise unsupported.
The Court noted that a similar line of reasoning had been advanced in Alcock’s case (1), where reliance was placed on the wording of section 106(2) of the Government of India Act, 1915. The Court reproduced the observations of the earlier Lordships, stating: “Upon the point thus broadly stated their Lordships have no difficulty in pronouncing a decision. To argue that if the legislature says that a public officer, even a revenue officer, shall do a thing and he, without cause or justification, refused to do that thing, yet the Specific Relief Act would not be applicable and there would be no power in the Court to compel him to give relief to the subject is to state a proposition to which their Lordships must refuse assent” (1 50 I.A. 227). The Board, in dealing with the argument that section 106(2) of the 1915 Act removed the High Court’s jurisdiction to make the order, observed: “In their Lordships’ view the order of a High Court to a revenue officer to do his statutory duty would not be the exercise of original jurisdiction in any matter concerning the revenue.” The Court adopted this reasoning and concluded that directing a revenue officer to perform a statutory duty did not constitute an exercise of original jurisdiction over a revenue matter.
Applying the above principles to the present dispute, the Court found that the respondent was seeking the Court’s intervention solely to compel the appellant to fulfil his statutory obligation to state a case. This request, the Court held, did not amount to the exercise of original jurisdiction in a revenue matter; it merely required the appellant to carry out a duty imposed by law. The appellant’s further contention that the proceedings had progressed beyond assessment to the enforcement stage was deemed irrelevant. The relief granted by the High Court did not aim to obstruct the Revenue Authority in the performance of its duties. Although an injunction had at one stage been issued against the appellant, that injunction had subsequently been cancelled, rendering the argument academic. Moreover, even if payment were to be enforced and the Court’s opinion on the statement of the case were adverse to the appellant, the appellant would be obligated, under section 59(2) of the Stamp Act, to comply with that opinion and to refund any amount that might have been recovered in excess. Consequently, the Court concluded that the appellant’s contentions failed. The appeal was therefore dismissed with costs, and the order of dismissal was entered. The agent for the appellant was identified as R. S. Narula, and the agent for the respondent as Tanubhai C. Desai.