Friday, 22 July 2016

Whether collector should always impose maximum penalty in every case on deficit stamp duty?


The last issue which we must take notice of is the levy of penalty. While it is true that sub section (4) of section 47-A empowers the Collector to impose penalty not exceeding four time the proper stamp duty, the same stands attracted in a case where it is found that the market value of the property was not truly set forth. There must therefore necessarily be an intention to evade payment of duty, which entails the levy of penalty. Secondly the words "not exceeding..." confer on the Collector a discretion to levy penalty dependent upon the facts of each individual case. The mere prescription of a maximum does not necessarily mean that in each case a penalty equivalent to four times the proper duty is liable to be paid. In any view of the matter, the imposition of penalty has serious civil consequences and therefore must be preceded by due application of mind and a consideration of all relevant factors including whether there was an intention to evade payment of duty. We find that the Collector has failed to advert to this aspect also while passing the impugned orders. 
HIGH COURT OF JUDICATURE AT ALLAHABAD 
The Chief Justice's Court
Case :- SPECIAL APPEAL DEFECTIVE No. - 598 of 2015
Appellant :- Smt. Vijaya Jain
Respondent :- State Of U.P. And 2 Others

Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
Hon'ble Yashwant Varma,J. 

Citation:AIR 2016 (NOC)449 ALL
Order Date :- 1.9.2015 



The original petitioner is in appeal before us consequent to the order of the learned Single Judge dismissing her writ petition on 17 August 2015 holding that the petitioner had an equally efficacious statutory remedy of filing an appeal under Section 56 of the Indian Stamp Act 18991.
The writ petition laid challenge to an order dated 10 November 2014 passed by the Collector and District Magistrate, Gautambudh Nagar holding that the gift deed executed in favor of the appellant on 17 December 2012 was liable to be subjected to a levy of Rs.8,89,000/- as deficit stamp duty together with penalty of four times the deficit stamp duty amounting to Rs.35,56,000/-. Thus a total amount of Rs.44,45,000/- was sought to be recovered from the appellant. Apart from the above, the deficit amount of stamp duty was also subjected to a levy of interest at the rate of 1.5 % per month on simple interest basis from the date of execution of the instrument till the date of actual recovery of the sums aforementioned. Since the order of 10 November 2014 was stated to have been made ex parte, the appellant sought recall of the same by moving an application before the second respondent. This application came to be rejected on 03 August 2015 and the original order of 10 November 2014 was maintained. It was aggrieved by the aforesaid two orders that the appellant filed a writ petition before this Court.
Before we proceed further, we would like to highlight here that the order of the second respondent refers to the instrument in question as a sale deed. However, a copy of the instrument, which has been produced before us and which fact was also borne out from the representation submitted by the appellant before the second respondent shows that it is in fact a gift deed dated 17 December 2012 executed by the husband of the appellant in her favour in respect of a plot described as Khasra No. 786 area 0.7160 hectare situate in village Surajpur, Pargana Dadri. The Collector proceeded to pass the impugned orders holding that the instrument had come to be taxed at rates applicable to agricultural land whereas in his opinion it was liable to be taxed treating the property comprised in the instrument as residential. He accordingly proceeded to apply the circle rate applicable to residential plots and held the Appellant liable to pay the amounts aforementioned.
The learned Single Judge has proceeded to dismiss the writ petition as noted above by holding that the appellant has an equally efficacious statutory remedy of filing an appeal under Section 56 of the Act. It is apposite to note here that the remedy of an appeal stands incorporated in Section 56 of the Act by virtue of insertion of sub-section (1-A) in the said provision in terms of U.P. Act No. 38 of 2001. The amendment came into force with effect from 20 May 2002. The proviso to sub-section (1-A) of Section 56 of the Act proceeds to impose a condition to the effect that no application for stay or recovery of any disputed amount of stamp duty including interest thereon or penalty shall be entertained unless the applicant has furnished satisfactory proof of the payment of not less than one-third of the disputed amount. This condition, however, does not stand engrafted in sub-section (1) of Section 56 of the Act, which confers revisional power in the Chief Controlling Revenue Authority.
The distinction in the requirements of the two provisions noted above fell for consideration before a Full Bench of this Court in Gaurav Aseem Avej Vs. Chief Controlling Revenue Authority U.P. Allahabad and others2 . The Full Bench answered the questions framed for its consideration in the following terms: -
"Conclusion:
(1) In view of the foregoing discussions, we are of the considered opinion that sub-section (1) of section 56 of the Indian Stamp Act, 1899 does not stand deleted by insertion of sub-section (1-A) in section 56 of the Act by the U.P. Act No. 38 of 2001 and both the provisions of revision and appeal are available to an aggrieved person.
(2) If a revision is preferred under sub-section (1) of section 56 of the Act then there is no requirement of deposit of 1/3rd of the disputed amount of deficient stamp duty including interest or penalty, if any while filing an application for grant of interim relief.
(3) The proviso of sub-section (1-A) of section 56 of the Act will apply only in cases where an appeal is preferred under sub-section (1-A) and its scope is restricted to appeal only.
(4) Sub-section (1-A) of section 56 of the Act as inserted by the U.P. Act No. 38 of 2001 is constitutionally valid."
We have, however, heard the learned counsel for the parties even on the assumption that the remedy of a revision was available to the appellant against the orders passed by the second respondent and whether in the facts and circumstances of the case, the appellant was liable to be relegated to the alternative remedy provided for under Section 56 of the Act.
The existence of an alternative statutory remedy as has been consistently held by the Courts is not a rule of inflexible character nor is it an inviolable condition. The Courts vested with the power and jurisdiction under Article 226 of the Constitution of India have always viewed this rule as a self imposed restriction rather than a rule which is to be blindly adhered to and which brooks of no exception. Some of the well settled exceptions to the rule of a petitioner being relegated to an alternative remedy are where the principles of natural justice have been violated or where orders are made without jurisdiction. Without burdening this judgment with precedent, we may refer to only two causes which travelled to the Supreme Court from proceedings arising out of the Stamp Acts of the respective States.
In Government of Andhra Pradesh and others Vs. Smt. P. Laxmi Devi3 while considering the validity of a provision requiring a pre-deposit for consideration of a revision petition against the order of the Collector, the Supreme Court observed as follows: -
"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 47-A 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 47-A of the Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Articles 14 of the Constitution vide Maneka Gandhi vs. Union of India [(1978) 1 SCC 248]. Hence, the party is not remediless in this situation."
A similar issue fell for consideration before the Supreme Court in Har Devi Asnani Vs. State of Rajasthan4. Considering the judgment of the High Court relegating the appellants before it to the alternative remedy of preferring a revision under the provisions of the Stamp Act as applicable in Rajasthan, the Supreme Court held as follows: -
"12. We are, however, inclined to interfere with the order dated 21.10.2009 of the learned Single Judge of the High Court in SB Civil Writ Petition No.1244 of 2009 as well as the order dated 22.03.2010 of the Division Bench of the High Court in D.B. Civil Appeal (Writ) No.1261 of 2009. The learned Single Judge of the High Court and the Division Bench of the High Court have taken a view that as the appellant has a right of revision under Section 65 (1) of the Act, the writ petition of the appellant challenging the determination of the value of the land at Rs.2,58,44,260/- and the demand of additional stamp duty and registration charges and penalty totaling to Rs.15,70,000/- could not be entertained under Article 226 of the Constitution. The learned Single Judge of the High Court and the Division Bench of the High Court have not considered whether the determination of market value and the demand of deficit stamp duty were exorbitant so as to make the remedy by way of revision requiring deposit of 50% of the demand before the revision is entertained ineffective. In Government of Andhra Pradesh and others Vs. Smt. P. Laxmi Devi (supra) this Court, while upholding the proviso to sub-section (1) of Section 47-A of the Indian Stamp Act introduced by Andhra Pradesh Amendment Act 8 of 1998, observed:
... ... ....

13. In our view, therefore, the learned Single Judge should have examined the facts of the present case to find out whether the determination of the value of the property purchased by the appellant and the demand of additional stamp duty made by the appellant by the Additional Collector were exorbitant so as to call for interference under Article 226 of the Constitution."

The law as authoritatively laid down by the Supreme Court in the aforementioned two judgments clearly establishes that a petitioner before the High Court is not liable to be relegated to the alternative remedy as a matter of rule. If in the facts of a particular case it is established that the principles of natural justice have been violated or that the order has been rendered without jurisdiction or if it is disclosed to the Court that grave injustice has been caused to the petitioner and it is found that his relegation to the alternative remedy would perpetuate injustice and cause prejudice, it is always open to this Court to exercise its prerogative constitutional powers and to issue an appropriate writ striking at the offending action. This principle stands extended in light of the abovementioned precedents to a case where the petitioner is foisted with an exorbitant and arbitrary demand in which case his relegation to the alternative remedy would not be justified.
The first issue that therefore falls for consideration is whether the case of the appellant fell within the exceptions referred to above and whether the facts of the present case justified the appellant being relegated to the alternative remedy.
Pursuant to the initial notice that was issued to the appellant on 9 September 2013, she filed a detailed reply for consideration of the second respondent on 3 October 2013. By her communication dated 7 July 2014, the appellant wrote to the District Magistrate that she had not heard back from his office subsequent to the reply being submitted and therefore presuming that the notice itself had been withdrawn, she requested the second respondent to send a letter or copy of the order which may have been passed confirming the above. The appellant does not appear to have received any reply from the office of the second respondent nor was she made aware of the continuance of the proceedings. On 9 January 2015, she again wrote to the second respondent, drawing his attention to the fact that her attempts to meet him had proved unsuccessful and that the staff of the collectorate was most uncooperative. She accordingly requested to be granted an appointment and a specific date of hearing to be fixed so that the controversy could be brought to a close.
It is apparent from the above narration of facts that the order of 10 November 2014 had not been brought to the notice of the appellant. The writ petition then recites that it was only on 31 May 2015 when the Amin of the village sought to serve upon her a recovery certificate dated 29 May 2015, that she was made aware of an adverse order having been passed in the proceedings in question. She accordingly applied for a certified copy of the order passed on 10 November 2014 and made a representation for recall of the said order on 4 June 2015. The second respondent did not proceed to reject the said representation dated 4 June 2015 outright but curiously enough issued a communication to the Naib Tehsildar on 9 June 2015 to submit a report after undertaking a spot inspection. The Naib Tehsildar in turn appears to have inspected the plot in question on 17 July 2015 and submitted a report of even date. On 3 August 2015, the second respondent relying on this report of 17 July 2015, proceeded to reject the application dated 4 June 2015 for recall and maintained the order in original passed on 10 November 2014.
From the above narration of facts, it is evident that the proceedings against the appellant were taken ex parte and in violation of the principles of natural justice. The communications addressed by the appellant to the second respondent clearly establish that she was not served with any notice nor made aware of the proceedings which were at that stage pending before the second respondent. Her application for recall of the original order was not dismissed on the ground that the rules of natural justice had been complied with or that she had willfully refused to cooperate in the disposal of the proceedings. The application dated 4 June 2015 for recall of the order dated 10 November 2014 came to be rejected based upon the report of the Naib Tehsildar dated 17 July 2015 which in the understanding of the second respondent fortified the conclusions which stood recorded in the original order of 10 November 2014. In our opinion, therefore, since the proceedings had been taken ex parte against the appellant and in complete violation of the rudimentary requirements of a fair hearing, her case clearly fell in the first of the well recognized exceptions to a party being relegated to the alternative remedy.
There is another aspect of the matter which the learned Single Judge in our opinion failed to bear in mind while relegating the appellant to the alternative remedy.
As was noticed by us above, the proceedings taken by the District Magistrate stood initiated and in fact concluded against the appellant on the ground that the instrument executed in her favour on 17 December 2012 had escaped payment of stamp duty. The gift deed itself had been duly registered upon payment of stamp duty of Rs.1,13,000/- and returned to the appellant. The amount paid as stamp duty was found to be deficit by the second respondent and it was on the above conclusion that the appellant was held liable to pay in total a sum of Rs.44,45,000/-. In addition to the above, the appellant was further called upon to pay interest on the deficit stamp duty @ 1.5 % per month on simple interest basis from the date of execution of the instruments till the date of recovery of the amount mentioned above. The demand therefore was an increase of almost forty times the original duty paid on the instrument. This in our opinion was clearly an exorbitant demand which stood raised against the appellant and therefore fell in the category of situations which were noticed by the Supreme Court in P. Laxmi Devi (supra) and Har Devi Asnani (supra). For this reason also, we are of the opinion that the learned single Judge clearly fell in error in relegating the appellant to the alternative remedy of an appeal under the Act.
Having arrived at the above conclusion we proceeded to hear the learned counsels for parties at some length on the merits of the issues raised in the writ petition. From the discussion that follows we are clearly of the opinion that the orders impugned in the writ petition were clearly unsustainable. We proceed to record our reasons hereinafter.
Before proceeding further, however, it would be relevant to note the salient statutory provisions that would have a bearing on the issues raised before us. The power of the Collector to move against an instrument on the ground of deficit stamp duty having been paid thereon is drawn from the provisions of Section 47-A of the Act. The relevant extracts of Section 47-A stand extracted below: -
"[47-A. Under-valuation of the instrument. -

(1) (a) If the market value of any property which is the subject of any instrument, on which duty is chargeable on the market value of the property as set forth in such instrument, is less than even the minimum value in accordance with the rules made under this Act, the registering officer appointed under the Registration Act, 1908, (Act no. 16 of 1908), notwithstanding anything contained in the said Act, immediately after presentation of such instrument and before accepting it for registration and taking any action under Section 52 of the said Act, require the person liable to pay stamp duty under Section 29, to pay the deficit stamp duty as computed on the basis of the minimum value determined in accordance with the said rules and return the instrument for presenting again in accordance with Section 23 of the Registration Act, 1908.

(b) When the deficit stamp duty required to be paid under clause (a) is paid in respect of any instrument and the instrument is presented again for registration, the Registering Officer shall certify by endorsement thereon, that the deficit stamp duty has been paid in respect thereof and the name and the residence of the person paying them and register the same.

(c) Notwithstanding contained in any other provisions of this Act, the deficit stamp duty may be paid under clause (a) in the form of impressed stamps containing such declaration as may be prescribed.

(d) If any person does not make the payment of deficit stamp duty after receiving the order referred to in clause (a) and presents the instrument again for registration, the registering officer shall, before registering the instrument refer the same to the Collector, for determination of the market value of the property and the proper duty payable thereon.

(2) On receipt of a reference under sub- section (1), the Collector shall after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under this Act, determine the market value of the property which is the subject of such instrument and the proper duty payable thereon.

(3) the Collector may, suo motu, or on a reference from any Court or from the Commissioner of Stamps or an Additional Commissioner of Stamps or from a Deputy Commissioner of Stamps or from an Assistant Commissioner of Stamps or any officer authorized by the State Government in that behalf, within four years from the date of registration of any instrument on which duty is chargeable on the market value of the property, not already referred to him under sub- section (1), call for an examine the instrument for the purpose of satisfying himself as to the correctness of the market value, of the property which is the subject of such instrument and the duty payable thereon, and if, after such examination, he has reason to believe that market value of such property has not been truly set forth in such instrument, he may determine the market value of such property and the duty payable thereon:

Provided that, with the prior permission of the State Government, an action under this sub-section may be taken after a period of four years but before a period of eight years from the date of registration of the instrument on which duty is chargeable on the market value of the property.

Explanation: The payment of deficit stamp duty by any person under any order of registering officer under sub-section (1) shall not prevent the Collector from initiating proceedings on any instrument under sub-section (3).

(4) If on enquiry under sub-section (2) and examination under subsection (3) the Collector finds the market value of the property-

(i) truly set forth and the instrument duly stamped, he shall certify by endorsement that it is duly stamped and return it to the person who made the reference;

(ii) not truly set forth and the instrument not duly stamped, he shall require the payment of proper duty or the amount required to make up the deficiency in the same together with a penalty of an amount not exceeding four times the amount of the proper duty or the deficient portion thereof.

* [(4-A) The Collector shall also require along with the deficit stamp duty or penalty required to be paid under clause (ii) of sub-section (4), the payment of a simple interest at the rate of one and half percent per mensem on the amount of deficit stamp duty calculated from the date of the execution of the instrument till the date of actual payment:

Provided that the amount of interest under the sub-section shall be recalculated if the amount of deficit stamp duty is varied on appeal or revision or by any order of a competent Court or Authority.

(4-B) The amount of interest payable under sub-section (4-A) shall be added to the amount due and be also deemed for all purposes to be part of the amount required to be paid.

(4-C) Where realisation of the deficit stamp duty remained stayed by any order of any Court or Authority and such order of stay is subsequently vacated, the interest referred to in sub-section (4-A) shall be payable also for any period during which such order of stay remained in operation.

(4-D) Any amount paid or deposited by or recovered from, or refundable to, a person under the provision of this Act, shall first be adjusted towards the deficit stamp duty or penalty outstanding against him and the excess, if any, shall then be adjusted towards the interest, if any, due from him.]"

The State Government in exercise of its rule making power has framed the Uttar Pradesh Stamp (Valuation of Property) Rules 19975. Rule 4 of the aforementioned rules, requires the Collector of the district to fix the minimum value per hectare/sq. mtr of agricultural and non agricultural land. The minimum value which is fixed by the Collector in exercise of powers conferred by rule 4 is commonly known as the circle rate. Rule 7 provides and lays down the procedure to be followed by the Collector where he chooses to exercise the power conferred upon him by virtue of Section 47-A of the Act. Rule 7 reads as follows:
"7. Procedure on receipt of a reference or when suo motu action is proposed under Section 47-A. (1) On receipt of a reference or where action is proposed to be taken suo motu under Section 47-A, the Collector shall issue notice to parties to the instrument to show cause within thirty days of the receipt of such notice as to why the market value of the property set forth in the instrument and the duty payable thereon be not determined by him.

(2) The Collector may admit oral or documentary evidence, if any, produced by the parties to the instrument and call for and examine the original instrument to satisfy himself as to the correctness of the market value of the subject matter of the instrument and for determining the duty payable thereon.

(3) The Collector may-

(a) call for any information or record from any public office, officer or authority under the Government or a local authority;

(b) examine and record the statement of any public officer or authority
under the Government or the local authority; and

(c) inspect the property after due notice to parties to the instrument.

(4) After considering the representation of the parties, if any, and examining the records and other evidence, the Collector shall determine the market value of the subject-matter of the instrument and the duty payable thereon.

(5) If, as a result of such inquiry, the market value is found to be fully and truly set forth and the instrument duly stamped according to such value, it shall be returned to the person who made the reference with a certificate to that effect. A copy of such certificate shall also be sent to the Registering Officer concerned.

(6) If, as a result of inquiry, the instrument is found to be under-valued and not duly stamped, necessary action shall be taken in respect of it according to relevant provisions of the Act."

Having extracted the relevant statutory provisions above, the following principles emerge therefrom. Sub-section (1) (a) of Section 47-A of the Act empowers the registering officer to call upon the person who has presented an instrument for registration to pay deficit stamp duty. This power is exercisable by the registering officer immediately after presentation of an instrument and before accepting it for registration and taking any action under Section 52 of the Act. This power is liable to be exercised in a situation where the market value of the property as set forth in the instrument is less than even the minimum value fixed by the Collector in accordance with the rules made under the Act. In distinction to the above, the power under sub-section (3) of Section 47-A is exercised by the Collector either suo motu or on a reference from any Court or from the Commissioner of Stamps or an Additional Commissioner of Stamps, Deputy Commissioner of Stamps, an Assistant Commissioner of Stamps or any officer authorized in that behalf by the State Government. This power confers jurisdiction and authority on the Collector to call for and examine any instrument for the purpose of satisfying himself as to the correctness of the market value of the property which forms the subject matter of the instrument and if upon such examination, he has reason to believe that the market value of such property has not been truly set forth in such instrument, he may proceed to determine the market value of such property and the duty payable thereon. The first distinguishing feature of sub section (3) is that it is available to be exercised even after the instrument has been registered. Secondly the Collector proceeds under sub section (3) upon finding that the "market value" of the property has not been truly set forth in the instrument as distinct from the "minimum value fixed by the Collector in accordance with the rules made under the Act" which is the benchmark for initiation of action under sub section (1).
The manner in which the power under sub-section (3) of Section 47-A of the Act is to be exercised stands encapsulated in rule 7 of the Rules. Sub-rule (1) thereof enjoins the Collector to issue notice to the parties to the instrument to show cause as to why the market value of the property set forth in the instrument and the duty payable thereon be not determined by him. The notice to show cause comes to be issued by the Collector on receipt of a reference or where action is proposed to be taken suo motu, of course, upon being satisfied that the market value of the property comprised in the instrument has not been truly set forth. In terms of sub-rule (2), the Collector is empowered to call for and examine the original instrument to satisfy himself as to the correctness of the market value of the subject matter of the instrument and for determining the duty payable thereon. In terms of the provisions of sub-rule (3), the Collector is empowered to call for any information, examine and record the statement of any public officer, or authority and inspect the property after due notice to the parties to the instrument. Sub-rule (4) mandates that after examining the record and other evidences, the Collector shall proceed to determine the market value of the subject matter of the instrument and the duty payable thereon. In terms of sub-rules (5) and (6), if as a result of such enquiry, the market value is found to be fully and truly set forth in the instrument and adequate duty paid thereon, the same is liable to be returned to the person who made the reference with a certificate to that effect. If as a result of enquiry, the instrument is found to be undervalued and not duly stamped, further action is liable to be taken in accordance with the relevant provisions of the Act.
Admittedly the gift deed executed on 17 December 2012 was duly registered and returned to the appellant. The instrument thereafter appears to have been scrutinized by the Sub Registrar, Gautambudh Nagar and the Assistant Inspector General of Registration, Gautambudh Nagar who submitted confidential memos to the second respondent on 4 January 2013 and 20 February 2013 respectively. It was on the consideration of the above confidential memos that the notice came to be issued by the Collector, Gautam Budh Nagar on 9 September 2013. The notice called upon the appellant to show cause why deficit stamp duty of Rs. 8,89,000 be not recovered from her.
From the provisions extracted above, it is apparent that the Collector proceeds under sub section (3) of Section 47-A read with rule 7 when he has reason to believe that the market value of the property comprised in the instrument has not been truly set forth and that in the opinion of the Collector, circumstances exist warranting him to undertake the enquiry contemplated under rule 7. What we however find from the notice dated 09 September 2013 is that the Collector has proceeded to record, albeit prima facie, that the instrument in question has been insufficiently stamped to the extent of Rs.8,89,000/-. The notice apart from referring to a note dated 20 May 2013, received from the Assistant Inspector General of Registration neither carries nor discloses any basis upon which the Collector came to the prima facie conclusion that the appellant was liable to pay Rs. 8,89,000/ as deficit stamp duty. In our opinion a notice of this nature must necessarily disclose to the person concerned the basis and the reasons upon which the Collector has come to form an opinion that the market value of the property has not been truly set forth. In the absence of a disclosure of even rudimentary details on the basis of which the Collector came to form this opinion, the person concerned has no inkling of the case that he has to meet. A notice in order to be legally valid and be in compliance with the principles of natural justice must necessarily disclose, though not in great detail, the case and the basis on which action is proposed to be taken against the person concerned. Not only this and as is evident from a bare reading of rule 7, at the stage of issuance of notice, the Collector has to proceed on the basis of material which may tend to indicate that the market value of the property has not been truly and faithfully disclosed in the instrument. The stage of computation of market value comes only after the provisions of sub rules (2) (3) and (4) of rule 7 come into play. At the stage of issuance of notices, the Collector calls upon the person concerned to show cause "as to why the market value of the property.... be not determined by him".
In the facts of the present case, we find that the Collector had already prejudged the issue by recording that the appellant had paid deficit stamp duty to the extent of Rs.8,89,000/-. A reading of the order passed on 10 November 2014 then shows that the Collector proceeded to raise the demand against the appellant proceeding on the assumption that the property comprised in the instrument was liable to be taxed not as an agricultural land but as a residential plot. He accordingly proceeded to levy the circle rate for a residential plot to compute the market value of the property. The order of 10 November 2014 neither refers to nor relies upon any evidence to establish that the property was being used for a residential purpose on the date of execution of the gift deed dated 17 December 2012. It is settled law that the market value of the property comprised in an instrument is liable to be computed with reference to the date on which it was executed.
A Full Bench of this Court in Shri Ramesh Chandra Srivastava, Rampur Vs.State of U.P and others6 was called upon to consider as to what should be the date with reference to which the market value of the property forming the subject-matter of the instrument is to be determined. Answering the above, the Full Bench explained the position of law in the following terms:-
"38. The above observation do support the view which we are proposing to take in the present case i.e. the relevant date for the purpose of determining the market value on which the stamp duty is payable is the date on which the instrument in question is executed, or in other words when the taxable event takes place.
xxx xxx xxx
66. In view of the above discussion we answer the second question by holding that the relevant date for determining the market value of the property for being subject-matter of the sale deed is the third i.e. January 3, 1985 when the Court executed the sale deed in question on behalf of the vendors."

This Court on more than one occasion has held that the market value of the land is not liable to be determined with reference to the use to which a buyer intends to put it in future. The market value of the property is to be determined with reference to its character on the date of execution of the instrument and its potentiality as on that date. We may in this connection refer to what was observed by a learned Single Judge in Veer Bal Singh Vs. State of U.P. And others7: -
"11. In M/s. Maya Food and Vanaspati Ltd. Co. V. Chief Controlling Revenue Authority (Board of Revenue) Allahabad, 1990 (90) RD 57, the Court held that the market value of the land could not be determined with reference to the use of the land to which the buyer intends to put in use. The Court held that a buyer may intend to establish an industrial undertaking thereon and that another buyer may intend to use it for agricultural purposes and a third person may intend to dedicate it for charitable purposes and that these different intentions of individual buyers may affect that price of each of them would be willing to pay for the property but the market value would not depend upon what each individual would offer for the property in question and that the market value would be that which a general buyer would offer and what the owner reasonably accepts for that property, the Court held that in determining the market value the potential of the land as on the date of sale alone could be taken into account in determining the market value and that the potential value of the land that could be put in use in future could not to be taken into consideration.
xxx xxx xxx

14. The other limb of the argument is that the market value of the land cannot be determined with reference to use of the land to which buyer intends to put it in use, has substance. The matter in depth has been examined by this Court in Shakumbari Sugar and Allied Industries Ltd. v. State of U. P. And others, 2007 (5) ADJ 602. In this case, reliance has been placed on earlier judgment in M/s. Maya Foods and Vanaspati Ltd., Allahabad v. Chief Controlling Revenue Authority, 1998 (4) AWC 636 wherein the following passage has been reproduced:
"Learned Chief Controlling Revenue Authority has observed that the land was purchased for an industrial purpose and the Collector is not arbitrary in deciding the price of the land on the basis of the proposed usage. This proposition is legally incorrect. The market value of the land cannot be determined with reference to the use of the land to which buyer intends to put it. One buyer may intend to establish an industrial undertaking thereon, another may intend to use it for agricultural purpose and a third person may intend to dedicate it for charitable purposes like leaving it open as pasture ground or a cremation ground or a playground. These different intentions may affect the price that each of them may be willing to pay for the property and such prices have wide variations but the market value is not what each such individual may offer for the property. The market value is what a general buyer may offer and what the owner may reasonably expect. In determining the market value, the potential of the land as on the date of sale alone can be taken into account and not what potential it may have in the distant future."
xxx xxx xxx
16. None of the authorities below besides the report of the Sub-Registrar has referred any other material in support of their orders. In Ram Khelawan @ Bachha v. State of U. P. Through Collector, Hamirpur and another, 2005 (98) RD 511, it has been held that the report of the Tehsildar may be a relevant factor for initiation of the proceedings under Section 47-A of the Act, but it cannot be relied upon to pass an order under the aforesaid Section. In other words, the said report cannot form itself basis of the order passed under Section 47-A of the Act. In the case of Vijai Kumar v. Commissioner, Meerut Division, Meerut, 2008 (7) ADJ 293 (para 17), the ambit and scope of Section 47-A of the Act has been considered with some depth. Taking into consideration the Division Bench judgment of this Court in Kaka Singh v. Additional Collector and District Magistrate (Finance and Revenue), 1986 ALJ 49; Kishore Chandra Agrawal v. State of U. P. and others, 2008 (104) RD 253 and various other cases it has been held that under Section 47-A (3) of the Act, the burden lay upon the Collector to prove that the market value is more than minimum as prescribed by the Collector under the Rules. The report of the Sub-Registrar and Tehsildar itself is not sufficient to discharge that burden"

The above principles of law enunciated in the aforementioned judgments have been consistently followed by this Court. We however find that the order of the Collector relies upon no evidence which would support imposition of residential rates on a property which was stated to be agricultural on the date of execution of the instrument.
We further find that after the appellant had filed an application for seeking recall of the ex parte order dated 10 November 2014, the Collector issued orders on 9 June 2015, calling upon the Naib Tehsildar to undertake an inspection. The inspection report is submitted on 17 June 2015. It records that the plot in question falls within the embankment of the Hindon river and is flood affected. It further records that the plot has been fenced in and that while earlier one room existed, the same appeared to have been removed. It records that the plot is lying vacant. It further records that around and in the vicinity of the plot in question, certain persons have indulged in plotting of land for the purposes of erecting residential houses. This report forms the bedrock for the subsequent order passed by the Collector on 3 August 2015. Neither this report nor the orders impugned rely upon any evidence which may tend to indicate that the plot when it was purchased or when it had been gifted was being utilized for residential purposes. There is no material on record to indicate that it is recorded as being for residential use. More fundamentally, the inspection report in question records facts as existing in June 2015 when in fact the enquiry should have been with regard to the nature of the plot as obtaining on the date of execution of the instrument. We are therefore of the opinion that the orders passed by the Collector in the absence of any material could not have taxed the instrument proceeding on the mere assumption that the property comprised therein was residential.
The last issue which we must take notice of is the levy of penalty. While it is true that sub section (4) of section 47-A empowers the Collector to impose penalty not exceeding four time the proper stamp duty, the same stands attracted in a case where it is found that the market value of the property was not truly set forth. There must therefore necessarily be an intention to evade payment of duty, which entails the levy of penalty. Secondly the words "not exceeding..." confer on the Collector a discretion to levy penalty dependent upon the facts of each individual case. The mere prescription of a maximum does not necessarily mean that in each case a penalty equivalent to four times the proper duty is liable to be paid. In any view of the matter, the imposition of penalty has serious civil consequences and therefore must be preceded by due application of mind and a consideration of all relevant factors including whether there was an intention to evade payment of duty. We find that the Collector has failed to advert to this aspect also while passing the impugned orders.
On an overall conspectus of the above facts we find that the impugned orders are rendered unsustainable being in violation of the principles of natural justice, in breach of the procedure prescribed under the Act and even otherwise suffering from the vice of non application of mind to relevant facts and the position of law as laid down by this Court. The Collector in our opinion therefore must be commanded to reconsider the matter afresh in light of the observations made hereinabove.
It has been submitted before us that the circle rate which has been fixed by the Collector under the rules is only an aid or a guide for the registering officer and is not determinative of market value. It was therefore submitted that the same could not form the basis for levy of stamp duty. Referring to the Noida Master Plan, the learned counsel for the appellant submitted that no residential activity is permitted in the area in question which is otherwise a flood zone and therefore also the imposition of additional stamp duty was unjustified. We are of the opinion that since the matter is being remitted back to the Collector it would be open to the appellant to raise all such and other pleas before the authority who would now proceed in the matter in light of the directions made hereinafter.
Accordingly, the Special Appeal shall stand allowed. The judgment and order of the learned Single Judge dated 17 August 2015 shall stand set aside. Consequent to what has been held above, the orders of the Collector dated 3 August 2015 and 10 November 2014 are hereby quashed. The matter shall stand remitted back to the Collector, Gautambudh Nagar for passing appropriate orders in accordance with law after affording due opportunity of hearing to the appellant.
Order Date :- 1.9.2015




(Yashwant Varma, J.) (Dr. D.Y. Chandrachud, C.J.) 


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