In a recent judgement, the Allahabad High Court rapped the state authorities for overlooking a trite law that stamp duty cannot be levied on contract security.
"This issue had arisen before this Court before one and a half decades but it appears that the authorities concerned have not shown that the said decision is binding on them as a similar issue came before this Court before three years and the judgment was struck down as it was beyond the jurisdiction of the authorities to demand the stamp duty beyond Article 57 (b) Schedule 1 B of the Stamp Act," the Bench of Justice Jayendra Thaker said.
The matter pertains to demand of stamp duty on a contract security to be deposited by a contractor, who was given the tender for repairing of roads in Mathura.
The authorities had had directed the Petitioner to pay total security along with stamp duty within ten days. However, when the Petitioner pointed out that stamp duty has to be levied only in accordance with Article 57 (b) Schedule 1B of the Stamp Act, 1899 (as amended in the State of UP), the authorities did not pass a work order for eight months.
The Court slammed the authorities for wasting its time and reminded them of its its previous judgments whereby it was settled that stamp duty cannot be charged on security deposit.
"Despite the decisions of this Court way back in the year 2005 in the case of M/s Strong Construction vs. State of U.P. and others (Civil Misc. Writ Petition No.35096 of 2004) decided on 22.3.2005 by the Division Bench of this Court and the recent oral order of this Court in Writ C No.52385 of 2015 (M/s Kishan Traders Vs. State of U.P. and 2 others) dated 18.7.2017, it appears that the authorities have demanded from the petitioner what is known as stamp duty," Justice Thaker said.
Article 57 (b) Schedule 1 B of the Stamp Act stipulates that stamp duty may be levied on Security Bond and Mortgage Deed, inter alia, executed by a surety to secure the due performance of a contract or the due discharge of a liability.
In M/s Strong Construction (supra) the High Court had observed that document/deed furnishing security cannot be treated as 'mortgaged deed' under Section 2(17) or a security deed under Article 57(b) of Schedule 1-B, Indian Stamp -Act, 1899 (as amended in State of U.P.).
The Court further held that insistence to not levy stap duty in accordance with Article 57 (b) amounts to "abuse of power" and to "over-retch rule of law".
Under such facts and circumstances, the Court quashed the order demanding stamp duty on contract security and directed the Petitioner to pay the stamp duty as per Article 57 (b) Schedule 1B.
Case Title: M/S Yogendra Kumar v. State of UP & Ors.
Case No.: Writ C No. 13395/2020
Quorum: Justice Jayendra Thaker
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Inputs by Ayushi Mishra