Rajasthan Stamp Law (Adaptation) Act, 1952 – Rajasthan Stamp Rules, 1955 – Indian Stamp Act, 1899 – s.3; Schedule I – Rajasthan Stamp Act, 1998 – Constitution of India – Entry 44 of List III, Entry 91 of List I – Power of the State to levy and collect stamp duty on insurance policies executed within the State – Appellant issued various insurance policies within the State of Rajasthan however, purchased insurance stamps from the State of Maharashtra – Demand for payment of stamp duty by the State of Rajasthan – Validity:

Held: State of Rajasthan has the power to impose and collect stamp duty on insurance policies under Entry 44 of List III, albeit such duty must be imposed as per the rate prescribed by a Parliamentary legislation under Entry 91 of List I – For the execution of insurance policies within the state of Rajasthan, the appellant is bound to purchase India Insurance Stamps and pay the stamp duty to the State of Rajasthan – s.3 of Indian Stamp Act, 1899 as adapted to the State of Rajasthan is the charging provision as per which the appellant must pay stamp duty to the state government on insurance policies executed within the state – The rate at which stamp duty is payable on policies of insurance under the 1952 Act has been adopted from Schedule I of the central Act, in accordance with Entry 91 of List I – The charging provision has thus been validly enacted by the state government under Entry 44 of List III – Therefore, the state government in the present case can impose stamp duty on the issuance of insurance policies within its territory and require the payment of such stamp duty by the appellant – Hence, the commencement of proceedings for recovery of stamp duty under the state law and the rules made thereunder was legal, valid, and justified – However, in the facts and circumstances of the present case, the state government shall not demand and collect the stamp duty as per the orders dtd. 16.09.2004, 16.10.2004, 11.10.2004, 01.11.2004, and 28.10.2004 – Impugned judgment of the High Court affirmed. [Paras 16, 37, 31, 38]

Rajasthan Stamp Law (Adaptation) Act, 1952 – Rajasthan Stamp Act, 1998 – s.3 – Insurance policies issued between 1993-94 to 2001-02 – Stamp duty leviable under the 1952 Act or the 1998 Act:

Held: Stamp duty must be levied as per the law in force as on the date of execution of the instrument – The charging provision i.e. s.3 of the 1998 Act, imposed stamp duty on every instrument mentioned in the Schedule that is executed in the state on or after the date of commencement of the Act – 1998 Act came into force only on 27.05.2004 – Hence, at the time that the relevant instruments were executed, the 1952 Act was still in force and the stamp duty was leviable under the same. [Para 8]

Rajasthan Stamp Law (Adaptation) Act, 1952 – ss. 2, 3(v), (vi) – Application of Indian Stamp Act, 1899 – Adaptations – Schedule I of the 1899 Act – Rajasthan Stamp Rules, 1955 – rr. 2 (d), 3 – Liability to pay stamp duty under the 1952 Act:

Held: r.3, r/w r.2(d), provides that the stamps issued by the State government will indicate the payment of stamp duty chargeable on an instrument – Therefore, the stamp must be issued by and the stamp duty must be paid to the State government for an instrument to be ‘duly stamped’ under the 1952 Act – State has the power to collect stamp duty under s.3 of the Indian Stamp Act, 1899 as adapted to the state of Rajasthan that provides that an instrument shall be chargeable with the duty of the amount indicated in the Schedule if it is executed within the state of Rajasthan – The mandate of s.3 is also found in r.3 that provides for “mode of payment” – r.3, read with r.2(d), provides that the duty with which any instrument is chargeable shall be paid by means of a stamp issued by the state government – The relevant event flowing from s.3 and r.3 authorising the levy and imposition of stamp duty is the execution of the policy of insurance within the state – The liability to purchase the stamps from the state of Rajasthan is therefore clear and unambiguous – Consequently, for instruments executed within the state, the purchase of stamps from outside the state will equate to evasion of stamp duty and the instrument will not be ‘duly stamped’. [Paras 22, 26]

Rajasthan Stamp Law (Adaptation) Act, 1952 – s. 3A(1) – Appellant issued various insurance policies within the state of Rajasthan and was required to affix stamps by paying stamp duty on such policies – It wrote to the Collector, Jaipur regarding the non-availability of ‘Agents License Fee stamps’ – Plea of the appellant that in view of the letter of the Treasury Officer, Jaipur dated 07.10.1991 stating that ‘India Insurance Stamps’ are the property of the central government and their supply and distribution is not related to their department, they were compelled to purchase the stamps from Maharashtra, without which they could not have issued the insurance policies in the state of Rajasthan – High Court without taking note of the aforesaid letter held that the correspondence of the appellant with the department pertained to Agents License Fee stamps and even if the stamps were unavailable, the appellant was duty-bound to pay the stamp duty to the state government in cash as provided under s.3A (1) – Propriety:

Held: High Court evidently did not take note of the letter dated 07.10.1991 – Further, it entirely failed to consider sub-section (4) which excludes instruments under Entry 91, List I from the application of s.3A – Therefore, the High Court also erred in holding that the appellant could have paid the stamp duty in cash – In view of the above circumstances, the appellant had no choice but to purchase the insurance stamps from outside the state – While it made every endeavour to purchase the stamp from within the state, due to the letter by the department and the lack of mechanism for payment of stamp duty under the 1952 Act in case of unavailability of insurance stamps, it was unable to purchase the stamps and pay the stamp duty to the Rajasthan government. [Para 36]

Constitution of India – Seventh Schedule – Stamp duty – Entry 91 of List I, Entry 63 of List II, and Entry 44 of List III – Distribution of legislative competence:

Held: A combined reading of the constitutional scheme shows that the power to prescribe the rate of duty is mutually exclusive and has been clearly demarcated between the Parliament and the legislatures of the state – Insurance policies, which are the relevant instrument for the purpose of the present case, fall under Entry 91 of List I for the purpose of prescription of rate of duty – This means that only the Parliament holds the exclusive power and the legislative competence under the Constitution to prescribe the rate of stamp duty on insurance policies. [Para 12]

Rajasthan Stamp Law (Adaptation) Act, 1952 – Indian Stamp Act, 1899 – Constitution of India – Article 254; Entry 44, List III:

Held: In the present case, the imposition of stamp duty by the state government was under the 1952 Act, which is a state law that has been enacted under Entry 44 of List III, and has received Presidential assent as contemplated under Article 254 – Article 254(2) clearly stipulates that when a state law with respect to a matter in the Concurrent List is repugnant to the provisions of an earlier law made by the Parliament or an existing law with respect to that matter, then the law passed by the state shall prevail in that state “if it has been reserved for the consideration of the President and has received his assent” – The 1952 Act that occupies the field in the present case has undisputedly received Presidential assent and hence it prevails over the Indian Stamp Act, 1899 so far as the state of Rajasthan is concerned. [Para 29]

Tax/Taxation – Tax law – Plea that the rate of taxation is an essential component for a valid imposition of tax and since the State legislature cannot prescribe the rate of stamp duty on insurance policies, there can be no valid imposition of stamp duty on these instruments by way of a state enactment:

Held: Rejected – Even if the State legislature cannot prescribe the rate of stamp duty, it can levy such duty at the rate as provided by the Parliament – In the present case, while it is true that the State cannot prescribe the rate of duty on insurance policies, that by itself does not mean that there is ambiguity or lack of clarity regarding the rate of such duty – Rather, the rate of duty is unambiguous, clear, and defined by the Parliament and is adopted by the state to levy and collect stamp duty. [Para 18]

Constitution of India – Entry 44 of List III; Entry 91 of List I – Contention as regards whether Entry 44 of List III is a taxation entry:

Held: Entry 44 of List III is a taxation entry that falls under the Concurrent List – State legislature has the legislative competence to impose and collect stamp duty on policies of insurance under Entry 44 of List III, as per the rate prescribed by the Parliament under Entry 91 of List I. [Para 19]