HINDUSTAN PETROLEUM CORPORATIPN LTD Vs. STATE

JUDGEMENT

(1.) In these writ petitions, common question arises for consideration as to the constitutional validity of Article 35 of the Second Schedule as inserted by Rajasthan Finance Act, 1997 in Rajasthan Stamp Law Adaptation Act, 1952. The provision of Article 35(a)(iii) as substituted by Rajasthan Act provides that a lease which purports to be for a term in excess of twenty years or perpetuity or where the term is not mentioned, the rate of the stamp duty payable shall be same as on conveyance as mentioned in Article 23, on the market value of the property which is the subjectmatter of the lease. In these cases, it is not disputed that leases were executed and demand of stamp duty was made in terms of Article 35(a)(iii) of Second Schedule of Rajasthan Stamp Act, 1952 (hereinafter referred to as 'the Act of 1952').' Following is the amended provision in Article 35 of Second Schedule of the Act of 1952.

(2.) The validity has been questioned on the ground that the aforesaid provision is ultra vires of Articles 14, 19(l)(g) of the Constitution. The lease only creates a limited right or an interest in enjoyment of the demised property for a definite period. A lease is not transfer of ownership and not a conveyance as defined in Section 2(10) of the Stamp Act. On the other hand, sale is a transfer of ownership for a price and there is an absolute transfer of all rights in the property sold. Thus, the leases beyond 20 years could not have been compared with the conveyance for the purpose of levy stamp duty. The transaction which is to be subjectmatter of the stamp duty, lease deed has nothing to be with the market value of the property. Hence, market value could not have been made the basis of levying the stamp duty. The basis ought to have been rental method of valuation and levy of stamp duty could have been made only on the basis of rent reserved in the lease. The prescription of any other method or mode of valuation on the basis of conveyance is arbitrary and violative of Article 14 of the Constitution. There was no justification for providing separate basis for levying of stamp duty for the leases beyond 20 years or in perpetuity. Action is illegal and arbitrary.There is no rhyme or reason to levy the stamp duty at the rate prescribed for conveyance. Concept of market value is completely foreign to a lease and providing of such concept for computing stamp duty on lease for a period exceeding 20 years or on transfer of lease is per se illegal. As such, amendment made vide Act of 1997 is ultra vires.

(3.) The stand of the respondents in return is that as the deficit stamp duty is not made good, demand was rightly raised in accordance with the amended provision. Stamp duty has rightly been demanded on the basis of market value of the property on a lease beyond 20 years. There is no illegality in the amendment substituted in Article 35 of Second Schedule of the Act. Only the rates have been defined, the document is not being treated as a conveyance. For the purpose of specifying the rate of stamp duty chargeable, different criterion have been applied considering the period of leases which is permissible. It is a matter of fiscal policy in which the Government should have free play. The provisions cannot be said to be illegal or arbitrary. Thus, there is no violation of provisions of Articles 14 and 19 of the Constitution.