Introduction
There are some Acts which are difficult to understand and follow correctly. In my view The Indian Stamp Act, 1899 and Registration Act and Transfer of property Act, are those Acts which are inter related and application of these acts is required almost every day. Be it an affidavit, agreement or execution of sale deed, receipt, family settlement, invariably one has to refer to and comply with the provisions the above Acts. In this article, attempt is made to highlight the provisions Stamp Act in a brief manner.
Scheme of Act
The Indian Stamp Act, 1839 is a Central legislation and deals with all aspects of stamps and stamp duties. It applies to whole of India except the State of Jammu & Kashmir. The Act through Schedule-1 lays down the rate of stamp duty payable on different instruments.
The instruments given in the Schedule-1 can be classified into two categories. First category of instruments consisting of bills of exchange, promissory notes, stamp duty for transfer of shares, debentures, bills of lading, proxies, letters of credit and receipts.
Second category of instruments consist of instruments such as agreements, affidavits, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney, security bond etc..
Vide entry 91 of List 1 central government is empowered to levy stamp duty in respect of first category of instruments and rates prescribed by Central Government will prevail over the rates prescribed by the state Government
Vide Entry 44 of List III and Entry 63 of List II, the State Governments have power to enact and levy stamp duty and prescribe the rates for all other instruments not referred above.
In the case of Second category of instruments, the rates prescribed by individual States will prevail in those States. However for these instruments, the rates prescribed in Scheudle-1 will be applicable only for union territories. If there is any conflict between State law and Union law, the Union law prevails as per Article 254 of Constitution.
It is clear from the scheme of legislation that fields for levy of stamp duty are central and state are demarcated so as to ensure that revenues collected through stamp duty are shared as per provisions of the Act.
Instruments are chargeable with stamp duty
As per Section 2(14) of the ACT, Instrument includes every document by which any right or liability, is, or purported to be created, transferred, limited, extended, extinguished or recorded. Section 3 says every instrument mentioned in Schedule I to Indian Stamp Act is chargeable to duty as prescribed in the schedule. Thus, if an instrument is not listed in the schedule, no stamp duty is payable.
The list includes all usual instruments like affidavit, agreement, lease, memorandum and articles of company, bill of exchange, bond, mortgage, conveyance, receipt, debenture, share, insurance policy, partnership deed, proxy, shares etc. Instruments chargeable with duty but executed out of India, have to be stamped within 3 months after they have been received in India.
Stamp Duty in case of several documents in one instrument
Some times several instruments are executed for one transaction .for egg. In case of sale, mortgage or settlement several instruments are executed for one transaction, only nominal value is collected on other instruments other than the principal instrument. If one instrument relates to several distinct matters, stamp duty payable is aggregate amount of stamp duties payable on separate instruments. If one instrument covering only one matter can come under more than one description given in Schedule to Stamp Act, in such case, highest rate specified among the different heads will prevail.
Exemptions from stamp duty
Instruments executed by, on behalf Government need not bear any stamps. Similarly if the Schedule exempts any particular instrument subject to certain conditions those are also exempt or concessional duty is payable. Section 9 of the Indian Stamp Act gives power to State Govt to remit the stamp duty in certain cases, by issuing a notification to that effect. If the state government is following Schedule I of the Indian stamp Act, this exemption will be applicable. For e.g. By exercising power u/s 9(a) of the Indian Stamp Act,1899,State Government of Orissa has issued a notification to provide exemption from stamp duty in the case of orders sanctioned by the Hon’ble High courts u/s 394 of the Companies Act,1956 . But this exemption is subject to fulfillment of conditions specified there in.
Types of Stamps
Stamps are of two types namely adhesive stamps and printed/embossed stamps. Again adhesive stamps are printed with words “Notarial” or Share. The former are used for notarial acts and the latter are used for transfer shares/debentures. Embossed stamps are non judicial stamps which are used for executing documents. However for court proceedings, court fee stamps are used as per the provisions of court fee Act and not under Stamp Act.
Manner of payment of stamp duty
Stamp duty is paid either by purchasing and affixing adhesive stamps or by remitting money for franking on the instruments. Adhesive stamps are used for execution of promissory notes, bill of exchange, and transfer of shares or debentures. Adhesive stamps are printed with words “Notaries” or Share. The former are used for notarial acts and the latter are used for transfer shares/debentures. Non judicial stamps are printed with Government emblem and are used for execution of agreements. Central government only has the authority to print the stamp papers and supplies to various states. Stamps of various denominations are sold in treasuries and also authorized stamp vendors who usually charge premium some times in case of scarcity. Adhesive stamps are to be cancelled so that the same can not be used again. Cancellation can be done by writing his name /initial or by drawing lines across the stamps. If cancellation is not done that instrument will be deemed to be unstamped
Liability to pay duty
In the absence of any agreement to the contrary, in respect of promissory notes, bonds, debentures, mortgage deeds, transfer of shares, by the person drawing or making or executing the instrument.
Effect of under stamped/unstamped documents
As per the Evidence act, any instrument presented as evidence must be charged with requisite stamps. If an instrument is not stamped or under paid, it will not be accepted as evidence in a court of law. Collector or any officer before whom it is presented can impound such under stamped/unstamped instruments and levy fine. The person executing the documents can present the document to the collector within one year from the date of execution for adjudication and pay the deficit stamp duty and make the document all right.
Conclusion:
Unless proper stamp duty is paid, documents executed may expose the Executants to huge penalty and also face the risk of court not accepting it as evidence. It is therefore important to check the relevant article in Schedule-1 or 1A of the states to ensure that proper stamp duty is paid at time of execution of instrument.
G S Rao
Chief Manager (Legal),
OCL India Limited
CAclubindia
