Applicability of Stamp Duty on Bill of Entry
The Bombay High Court in a recent case of Tata Autocomp Systems Limited v. State of Maharashtra, Writ Petition (L) No. 478 of 2022 (‘Tata Autocomp’) granted interim relief by directing Maharashtra Government to refrain from levying Stamp Duty under Article 29 (Article 24 in Bombay Stamp Act, 1958) of Schedule I of the Maharashtra Stamp Act, 1958 (‘Stamp Act’) on Bill of Entry (‘BOE’) filed by importer. In this NITYA Outlook, we have highlighted important points on this evolving issue.
This dispute traces back to 2006 when Stamp Act was made applicable to the State of Gujarat, Article 24 was amended and Guidelines dated March 29, 2006 were issued by Gujarat Government for imposing Stamp Duty on imported goods.
In the case of Essar Steel Limited v. Superintendent of Stamps, Special Civil Application No.1490 of 2007, legality and correctness of such levy was challenged before the Single Judge of the Gujarat High Court. The Court upheld validity of Circular and held as under:
- If Bill of Lading (‘BOL’) and BOE are in name of same persons, no Stamp Duty can be levied under Article 24 as Stamp Duty is already levied on BOL under the Indian Stamp Act, 1899.
- If BOL and BOE are in name of different persons, it will amount to transfer of goods to third person. Hence, Article 24 will be applicable and third person will be required to pay Stamp Duty.
The aforesaid judgment was challenged before Division Bench of the Gujarat High Court in the case of State of Gujarat v. Reliance Industries Limited, Letters Patent Appeal No. 6 of 2011 (‘Reliance Industries’). The Court over-ruled Single Bench judgment and quashed levy of Stamp Duty on BOE. The Court made following observations:
- BOE does not create any right, obligation or liability on maker thereof which is a pre-requisite for an instrument under the Stamp Act [Refer: UOI v. Chowgule and Company Private Limited, 1985 (20) ELT 57 (Bom.) affirmed by Supreme Court vide 1987 (28) ELT 39 (SC)]
- Under Article 24, Stamp Duty is applicable on negotiable instrument capable of endorsement / assignment / transfer and which would enable assignee of person named therein or holder of instrument to take delivery. However, only importer named in BOE can clear goods from customs and Customs law does not allow endorsement / assignment of BOE.
- BOE is presented only for clearance of goods and is merely an order of assessment from customs and not an instrument of delivery of goods under Article 24 of the Stamp Act.
Department’s appeal against Reliance Industries judgment is pending before the Supreme Court. The Court specifically denied stay of operation of the High Court judgment while admitting this appeal.
The High Courts of Gujarat and Maharashtra in several cases including Ramratna Wires Limited v. State of Gujarat, Special Civil Application No. 14819 of 2020, Vedanta Limited v. State of Gujarat, Special Civil Application No. 19862 of 2021 and Viraj Profiles Limited v. State of Maharashtra, Writ Petition (L) No. 12718 of 2021 relied on Reliance Industries judgment to quash levy of Stamp Duty on BOE.
In case of Tata Autocomp also, the Bombay High Court relied on Reliance Industries judgment while granting interim relief.
NITYA Comments: Reliance Industries judgment was correct. In the cases of Ramratna Wires and Vedanta (supra), the Court even allowed refund of Stamp Duty already paid by importers. Accordingly, importers across India paying Stamp Duty on BOE may consider challenging such levy and file refund of Stamp Duty already paid in past.
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