Allowed

M/S Creative Aromatics Specialties Pvt. Ltd. v. State of Karnataka

Karnataka HC18 Oct 2022WP/5474/2020

Case brief

AI extract

What is this about?

The High Court of Karnataka quashed an administrative order rejecting a refund claim for excess stamp duty. directing the respondents to refund Rs.33,21,635/ with interest, relying on coordinate bench precedents and constitutional mandates.

What did the court decide?

Quashing of the endorsement dated 20.11.2019 and direction to refund Rs.33,21,635/- with 6% interest from the date of application.

M/S Creative Aromatics Specialties Pvt. Ltd. Vs… — Company and Corporate | Karnataka HC (2022)

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WP No. 5474 of 2020

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 18^TH DAY OF OCTOBER, 2022

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BEFORE

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THE HON'BLE MR JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 5474 OF 2020 (GM-ST/RN)

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BETWEEN:

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M/S CREATIVE AROMATICS SPECIALTIES PVT. LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 NO.67/3, INDUSTRIAL SUBURB YESHWANTHPUR, BANGALORE-560022 REP. BY ITS DIRECTOR MR. B. MANOHARAN

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…PETITIONER

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(BY SRI. SHARATH GOWDA.G.B, ADVOCATE)

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AND:

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STATE OF KARNATAKA VIDHANA SOUDHA BANGALORE

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REP. BY ITS CHIEF SECRETARY-560001

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Digitally signed by PADMAVATHI B K Location: HIGH COURT OF KARNATAKA

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DEPT. OF STAMPS AND REGISTRATION KANDAYA BHAVANA, K.G.ROAD BANGALORE-560009 REP. BY SUB REGISTRAR

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DISTRICT REGISTRAR BENGALURU RURAL DISTRICT NO.B 89, 3^RD FLOOR, 5^TH MAIN ROAD RAJAJINAGAR ESTATE AREA BANGALORE-560010

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SUB REGISTRAR DODDABALLAPURA BANGALORE RURAL-561203

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…RESPONDENTS

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(BY SRI. N. KUMAR, AGA)

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WP No. 5474 of 2020

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT AND QUASH THE ENDORSEMENT DATED 20.11.2019 ISSUED BY THE 2^ND RESPONDENT PRODUCED AT ANNEXURE-A AND ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner is before this Court calling in

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question an order dated 20.11.2019 by which refund of excess stamp duty, sought by the petitioner, which is paid

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in terms of Section 44(2) of the Karnataka Stamp Act, 1957, is rejected. He seeks a consequential direction by issuance of a writ in the nature of mandamus directing respondent No.2 to refund excess stamp duty of Rs.33,21,635/-.

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Heard Sri. Sharath Gowda G.B., learned counsel

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for the petitioner and Sri. N.Kumar, learned Additional Government Advocate for the respondents.

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The petitioner purchased the subject property on 31.05.2018 from one Gerb Vibration Control System

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WP No. 5474 of 2020

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Private Limited. While registering the document of sale, stamp duty was paid on a sum of Rs.6 crores, which was the sale consideration and the petitioner was to pay a sum of Rs.33,90,000/- as stamp duty, instead the petitioner pays Rs.74,01,500/- as stamp duty. This was in excess of what was to be paid. The petitioner then makes an application under Section 44(2) of the Stamp Act seeking refund of the excess stamp duty that is paid. The respondent No.3 in terms of his recommendation dated 18.02.2019 clarified the entire position and communicates it to the respondent No.2 holding that the petitioner is entitled to refund of stamp duty in terms of Section 44 (2) of Stamp Act. The respondent No.2 rejects the application without even making a reference to Section 44(2) of the Stamp Act, but relying upon a judgment of the Andhra Pradesh High Court holding that a stamp duty paid by mistake cannot be refunded under Section 45(2) of the Act

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as the petitioner had voluntarily made the said payment. It is this rejection that drives the petitioner to this Court in the subject petition.

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4. The learned counsel appearing for the petitioner

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would contend that the stamp duty was paid on a mistaken valuation of the property, which later came into light that the stamp duty that had to be paid was much lesser than what is paid and therefore, approached the respondent No.3 with an application under Section 44(2) of the Act. Respondent No.3 in detail held that the petitioner was entitled for such refund. Notwithstanding the said order/recommendation, the impugned endorsement is issued, which bears no application of mind. He would seek to place reliance upon the judgments rendered by this Court in the case of Dalmiya

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Cement Venture Limited vs. The State of Karnataka and

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others reported in ILR 2017 KAR 4989 and in the case of

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Sri.S.K.Parthasarathy Raju and another vs. The State of Karnataka and another in W.P.Nos.1334-1335/2015 dated 06.06.2017.

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5. The learned AGA though would seek to defend

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the order impugned, is not in a position to dispute the

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question of law as is laid down by this Court in plethora of cases where excess stamp duty being held at hands of the State is held to be an unjust enrichment on the part of the State.

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I have given my anxious consideration to the

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submissions made by the respective learned counsel and have perused the material on record.

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The afore narrated facts are not in dispute and

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are therefore not reiterated. The only issue that falls for consideration is whether the petitioner would be entitled to refund of excess stamp duty paid.

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The excess stamp duty is admittedly paid in terms of the findings of the District Registrar dated 18.02.2019. The reasons rendered by the respondent No.3 are as follows:

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(13) Further, the conditions to be fulfilled while making a layout are: any layout will be approved by the competent authority only after development of layout by making pakka (tar road) road formation, box type drains, laying water supply connections, providing underground sewage

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system, providing Electric Polls and connections, and other miscellaneous works which will cost considerable amount, and if it is to be gated community layout it will be much more expensive. Added to this there will be additional expenditure of plan approval charges, betterment charges, overhead commissions, legal expenses and other charges which I have not considered while arriving at the valuation of the said property. If these aspects are considered the valuation of the property will again be less than the above mentioned valuation. Be that as it may.

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(14) Even though the assessment of valuation made by the sub registrar is unscientific and cannot be accepted in view of the discussion made above, the purchaser has produced an agreement of sale dated 13/03/2018 entered into between the same parties before the registration of the sale deed and the consideration shown in the agreement of sale is 6 crores, the same sale consideration is shown in the sale deed. This agreement will prove that are no intentions on the part of the parties to register the sale deed on a lesser valuation to save stamp duty. However the valuation assessed by me at the rate of 8300/- per sq.mtr is as per the notification published by the department. There is no violation or reduction in the prescribed rate.

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(15) In view of the above discussion it can be concluded that the valuation of the schedule property in question, assessed by the sub registrar at Rs 13,09,96,327/- is unscientific and cannot be accepted. The market valuation of the property/ consideration of Rs 6 crore shown in the document is the price agreed by and between the parties, and the valuation of the property assessed by me at Rs 7,22,10000/- is in conformity of the market valuation guidlines. As such the stamp duty at the rate of 5.65% is payable is on the market valuation of property assessed as per the valuation guidelines, and it will be about Rs 4079865/. The purchaser has already paid stamp duty of Rs 74,01,500/- and he has requested for the refund of excess stamp duty paid by him. Therefore the request of the applicant may be allowed and refund of excess stamp duty of Rs 3321635/- paid by the

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applicant may be ordered to refund. The application is within time.

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(emphasis supplied)

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9. The respondent No.3 draws up a conclusion that

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the petitioner is entitled to refund of Rs.33,21,635/- after assessment of the property and the correct calculation of

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the stamp duty. This is turned down by the impugned order without even making reference to Section 44 of the Stamp Act, much less considering it. The issue need not detain this Court for long or delve deep into as the issue with regard to whether the petitioner and the like would be entitled to refund of stamp duty that is paid on a wrong calculation of value of the property is considered by the Coordinate Bench of this Court in the case of Dalmiya Cement Venture Limited vs. State of Karnataka reported

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in ILR 2017 KAR 4989 , wherein it is held as follows:

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6. The stamp duty that was required to be paid under the Act, on the date of conveyance was at the rate of 5.8%. The said rate of percentage of stamp duty was brought into effect from 1st April 2012, by Gazette Notification dated 13.3.2012. Before the publication of the Gazette Notification, the stamp duty required to be paid was at the rate of 6.8%. It is the case of the petitioner that being oblivious of the reduction of the stamp duty under the Gazette Notification dated 13.3.2012, duty at the rate of 6.8% was paid on 30 sale deeds that were executed after the rates of stamp duty was reduced. The sale

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deeds were registered between 11th June and 12th September 2012. The petitioner having found that mistakenly the stamp duty was paid in excess of the amount of stamp duty, legally payable, gave a representation on 5th October 2012 to the respondent No. 4, claiming the refund of the amount towards excess stamp duty paid inadvertently.

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7. It is significant to note that the respondent No. 4 admitted the excess stamp duty paid by the petitioner to the tune of Rs. 10,11,810/-, however, communicated to the petitioner on 12.10.2012 (as per Annexure-F to the writ petition) that the refund can be effected only after prior sanction of the Chief Controlling Revenue Authority i.e., respondent No. 2 herein and requested the petitioner to approach the Head Office at Bengaluru for necessary process in this regard. Pursuant to which the petitioner approached the respondent No. 2 who rejected the claim of the petitioner.

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8. At this juncture, it is beneficial to refer to Section 44(2) of the Act which runs thus;

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“(2) Where, in the opinion of the Chief Controlling Revenue Authority, stamp duty in excess of that which it is legally chargeable has been charged and paid under [any of the provisions of this Act], such authority may upon application in writing made [within six months from the date of registration of the instrument or the order charging the same], refund the excess.

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[Provided that with sanction of the State Government the Chief Controlling Revenue Authority may make the refund after the period specified in sub-section (1) or (2)].

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9. The Hon'ble Apex Court in the case of Mafatlal Industries Ltd. v. Union of India [(1997) 5 SCC 536] has held thus;

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“Any provision appearing or trying to bar recovery of illegally collected tax is violative of Article 265 of the Constitution and must be struck down. Once it is established that more than what is payable under the statute has been collected from the taxpayer, the

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taxpayer automatically gets- a right to get back the whole amount. If the right is sought to be effectively taken away by imposing conditions, then the law imposing these conditions must be declared to be bad and ultra vires the Constitution.

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There is another aspect of this matter. The Exercise Officer cannot tax more than what is permitted by the statute. If the levy is in excess of the statute, then its retention by the State is unauthorised by law. What is being retained is not in enforcement of the charging section but something else. Such illegally collected tax the money has to be utilised by the State and is not within the disposing power of the State. If the money has to be utilised by the State, the State has to find out some legitimacy for having possession of the money.

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Protection under Article 265 afforded to the citizens from State oppression in financial matters. Article 265 must be implemented in letter and spirit as it stands and all the tax laws and all Government actions to realise and retain tax must be tested on the anvil of this guarantee. The courts should jealously guard against any attempt to whittle down or do away with any of the guarantees given under the Constitution to the citizens. If any law is passed for retention of illegal levy, it must be struck down. If the Court comes to the conclusion that a levy of tax is unlawful, the Court will direct the Government to return the tax. It is not for the Court to enquire how the taxpayer has managed his affairs after payment of the unlawful levy. The Court cannot, by torturing the language of Article 265 or by any other means, construe it so as to give it a meaning which it does not naturally bear.”

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10. In the light of the said judgment, it can be held that no unjust enrichment can be appreciated, as recovery or accepting the duty in excess of what is authorised by law would be against the mandate of Article 265 of the Constitution of India. No amount received in excess than what is stipulated chargeable can be retained by the authorities. The same would be construed as the amount collected without authority of law which is wholly unsustainable. There is no question of petitioner being charged. It is an admitted fact that the

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petitioner paid excess stamp duty to an extent of 1%, the same cannot be retained by the authorities, despite the application made by the petitioner for the refund of the excess amount within the period stipulated under Section 44 of the Act. The authorities are bound to refund the excess stamp duty collected in terms of Section 44(2) of the Act.

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11. Hence, the impugned order/endorsement at Annexure-G is quashed and consequently, the respondent Nos. 2 to 4 are directed to refund the excess stamp duty of Rs. 10,11,810/- to the petitioner with interest at the rate of 6% per annum from the date of filing of the application by the petitioner till the date of actual payment. The writ petition stands allowed accordingly.

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(emphasis supplied)

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In the case of Sri. S.K.Parthasarathy Raju

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and another vs. The State of Karnataka and another

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in WP Nos.1334-1335/2015 , a Co-ordinate Bench of

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this Court, wherein it is held as follows:

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“6. At this stage itself it is necessary to indicate that rather than the contentions which are urged in the objection statement, the reason as assigned in the impugned endorsement dated 23.09.2014 would have to be taken note and then arrive at a conclusion, as the decision taken by the authority cannot be substituted by other reasons. If in that view the endorsement dated 23.09.2014 is closely perused, it is seen that the competent authority has kept in view the provision contained in Section 2 of the Act in the light of the stamp duty as provided under Article 41(eb) to the Schedule to the Act. With regard to the refund as sought, it is stated in the endorsement that the stamp duty as paid by the petitioners is not pursuant to any order or demand made by the authorities. Therefore, the question of refund does not arise is the contention. On this aspect of the matter what is necessary to be taken

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note is that the provision in Section 44(2) of the Act provides for refund of stamp duty which is paid in excess of what is otherwise legally chargeable.

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7. If that be the position, the issue is not as to whether the amount had been voluntarily paid by the party or had been demanded by the authorities and had been paid. What is necessary to be considered while taking note of an application filed under Section 44(2) is the actual legally chargeable stamp duty on a transaction and in that light examine whether the parties entering into a transaction have made payment of stamp duty in excess of the legally chargeable limit. On arriving at such conclusion, if it is seen that any excess amount than what is legally chargeable is paid, the same becomes refundable.

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8. In that light in the present facts from the very endorsement, it is clear that there is no confusion in the mind of the authorities that the Power of Attorney as well as the Sale deed in question related to the very same property. However, what has been indicated by the authorities to deny the relief to the petitioners is that the Sale deed dated 07.01.2011 has been drafted as an independent transaction without making it as a sale transaction pursuant to, or in view of the power of attorney dated 07.01.2008. On this aspect of the matter also the competent authority has committed an error. If the sale deed in question is perused in detail, page 6 of the Sale deed would refer to the General Power of Attorney dated 07.01.2008 and the circumstance under which the same had been executed and that the sale under the Sale deed had been deferred in view of a Civil dispute pending and also a reference is made with regard to a Will also having been executed in that regard.

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9. The recital to the said effect in the sale deed would clearly indicate that the Power of Attorney had been executed at a point when there was some legal impediment to execute the sale deed and on the same being cleared the execution of the sale deed had been made. The fact that at the first instance when the Power of Attorney was executed, the stamp duty as admissible had been paid would indicate that the

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transaction was only to be formalized subsequently and in that view when the stamp duty having been paid at the time of execution and registration of the Power of Attorney, was required to be adjusted towards the Sale deed relating to the very same transaction that had been executed and registered. On this aspect of the matter the competent authority in any event has referred to the proviso in Article 41(eb). If that be the position in terms thereof the adjustment was required to be made and since the stamp duty has been paid once over again, such stamp duty will have to be considered as a stamp duty which had been paid in excess and what is legally chargeable. If that be the position that portion of the amount is required to be refunded.

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Accordingly, the endorsement dated 23.09.2014 is set-aside and a direction is issued to the respondents to refund the stamp duty which had been paid by the petitioners on the document dated 07.01.2011 and the excess registration fee if any”.

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(emphasis supplied)

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In the light of the issue being covered by the

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decisions of the Co-ordinate Benches of this Court, on all its fours, the petitioner would be entitled to the relief, in terms of what is ordered by the District Registrar.

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For the aforesaid reasons, the following:

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ORDER

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i) The endorsement dated 20.11.2019 stands quashed.

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ii) The petitioner is declared to be entitled to a refund of Rs.33,21,635/-.

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iii) The said amount shall be refunded within 8 weeks from the date of receipt of copy of this order, failing which, the petitioner would become entitled to 6% interest from the date of the application till the date of its actual payment.

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Sd/JUDGE

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Prs*

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List No.: 1 Sl No.: 48

M/S Creative Aromatics Specialties Pvt. Ltd. v. State of Karnataka

Case brief

What is this about?

What did the court decide?

M/S Creative Aromatics Specialties Pvt. Ltd. v. State of Karnataka

Case brief

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What did the court decide?

What the court decided

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