India's Government Appeals Against Stamp Duty Ban on Imports

The first bench of the Gujarat High Court on July 13, 2011 admitted the state government's appeal against a single judge's order invalidating levy of stamp duty on import of goods except where bailment of goods is evidenced by a delivery order.

The government of Indian has claimed that the impugned order was "erroneous and bad in law". Government's counsel claimed that while the companies would be benefited by billions of rupees, the state would lose the duty of the said amount on account of operation of the order.

The government claimed in their appeal that the single judge had overlooked the provisions of law and did not appreciate the provisions of Stamp Act properly.

The bench comprising Chief Justice SJ Mukhopadhaya and Justice JB Pardiwala heard these set of appeals by the State and Superintendent of Stamps against Essar Steel Limited, Essar Oil Limited, Tata Chemicals Limited, Reliance Industries Limited, Hindalco Industries limited, Indian Oil Corporation Limited, Ultratech Cement Limited, Gujarat Ambuja Cements, IFFCO Limited, and others.

The court while refraining from passing any interim orders as sought by the State clarified that if any adjournment is sought by the respondent companies then it would be inclined to pass an interim order directing the companies to pay 50 percent of the amount in dispute as deposit during the pendency of the case.

The companies had earlier approached the court seeking appropriate direction for declaring a government circular seeking imposition of stamp duty on import of goods, as bad in law. The said circular of January 2007, was issued to port officers/traffic managers of concerned ports directing that they should not issue demand certificate for any vessel arrived at port unless they have stamp duty clearance.

The companies had claimed that stamp duty can be charged only on an instrument and in import transactions of the nature involved, there was no instrument apart from a Bill of Lading and Bill of Entry which were on the name of importer itself. It was pointed out that imposition of stamp duty on Bill of Lading and Entry was beyond the legislative competence of state legislature as it is specifically included in Union List of Seventh Schedule of the Constitution. It was also pointed out that the importers had already paid stamp duty to central government and any additional duty would amount to double taxation.

The single judge while allowing the batch petitions held that the bill of entry and bill of lading in the same name were in effect identical instrument and no separate stamp duty can be levied under the impugned circular.

The government in the appeal claimed that a bill of entry is a statutory requirement under provisions of Customs Act and regulations framed thereunder and not a mere formality. The government has further contended that relief claimed by the petitioning companies was premature when no assessment was made and that the court could not have granted the writ of prohibition against the levy of tax.

"Under the guise of seeking a declaration about invalidity of the circular the petitioners have restrained the department from levying stamp duty on the instrument bypassing the entire machinery under the Act," it was submitted.

The State also contended that there is nothing in the Constitution to prevent the same person or property being subject to both, state/ union and municipal taxation, exercising their power twice for different purposes.

The court has now fixed the matter for final hearing on July 21.