18 June 2025 Civil Writ Petition >> Civil & Consumer Law  

In a significant ruling of IL & FS Financial Services Ltd. Mumbai v/s State of Maharashtra, Through Government Pleader Original Side, Bombay & Others, the High Court has dismissed a petition challenging demand notices for stamp duty and penalty under the Maharashtra Stamp Act, primarily upholding the levy of a substantial penalty. The Court's decision underscores the importance of timely payment of adjudicated stamp duty, reinforcing the provisions of Section 31(4) of the Act.

The case revolved around demand notices issued in December 2013 and December 2014 by the Respondents (the stamp duty authorities) to the Petitioner. The Petitioner, seeking relief under Article 226 of the Constitution of India, specifically challenged the penalty component of these notices, amounting to Rs. 9,76,03,385. The underlying stamp duty of Rs. 7,07,27,090, imposed on a scheme of arrangement sanctioned by the Company Court on April 11, 2008, was largely accepted by the Petitioner throughout the proceedings.

Background of the Dispute:

The timeline of events highlights the Petitioner's consistent stance on the stamp duty itself but a persistent challenge to the penalty.

• April 11, 2008: Company Court sanctions a scheme of arrangement.
• May 17, 2008: Petitioner lodges the order with the Collector of Stamps for adjudication of stamp duty under Section 31 of the Maharashtra Stamp Act.
• April 16, 2010: Respondents seek details for stamp duty adjudication; Petitioner admittedly fails to reply.
• December 23, 2013: Interim demand letter issued for stamp duty and penalty under Section 31(4) of the Act. The penalty was calculated from the date of the Company Court's order (April 11, 2008) due to the delay.
• January 15, 2014: Petitioner requests a personal hearing regarding the interim demand.
• July 7, 2014 & December 19, 2014: Petitioner files written submissions and subsequent letters, explicitly disputing only the penalty while agreeing to pay the stamp duty. The letter dated December 19, 2014, even requested a revised demand notice without the penalty.
• December 31, 2014: Final demand notice issued, confirming both the stamp duty and the penalty.
• January 14, 2015: Petitioner appeals to the Chief Controlling Revenue Authority, again challenging only the penalty and accepting the stamp duty. The appeal prayer sought permission to deposit the stamp duty to stop the penalty calculation.
• March 25, 2015: Interim order passed by the Chief Controlling Revenue Authority, allowing deferment of penalty adjudication upon payment of the admitted stamp duty.
• March 27, 2015: Petitioner pays the stamp duty of Rs. 7,07,27,090.
• April 25, 2017: The appeal filed by the Petitioner is held to be not maintainable, leading to the institution of the current High Court petition.

Petitioner's Core Argument:

The Petitioner's primary argument before the High Court, as articulated by their counsel, Mr. Pimple, was that the penalty under Section 31(4) of the Maharashtra Stamp Act should only be levied if payment is not made within 60 days from the "date of service of the notice of demand." Mr. Pimple contended that the interim order of the Chief Controlling Revenue Authority dated March 25, 2015, should be considered the starting point for this 60-day period. Since the stamp duty was paid on March 27, 2015 (within two days), the Petitioner argued there was no default and thus, no penalty should be imposed.

Respondent's Rebuttal and Court's Analysis:

The Respondents, through Mr. Takke, argued that the Petitioner's consistent acceptance of the stamp duty amount, as evidenced by their letters and appeal memo, clearly indicated their liability well before the interim order. The interim order was merely for deferment of penalty adjudication upon payment of the admitted stamp duty.

The High Court, after a thorough review of the facts and submissions, unequivocally sided with the Respondents. The Court's analysis highlighted several key points:

• Consistent Acceptance of Stamp Duty: The Petitioner's letters dated July 7, 2014, and December 19, 2014, and especially the appeal filed on January 14, 2015, consistently demonstrated an acceptance of the stamp duty amount. A "Note" appended to the Petitioner's "Updated List of Dates and Events" also explicitly stated that the challenge was "only limited to the penalty amount imposed upon the Petitioner."
• No Challenge to Stamp Duty Quantum: Despite a momentary shift in argument during the hearing where the Petitioner's counsel suggested a challenge to the stamp duty, no actual submissions were made to demonstrate its erroneous calculation. The Court noted that the initial argument clearly stated the only issue was the penalty.
• Triggering of Penalty under Section 31(4): Section 31(4) of the Maharashtra Stamp Act mandates penalty if stamp duty is not paid within 60 days from the "date of service of the notice of demand." The Court reasoned that the demand notices of December 23, 2013, or December 31, 2014 (or at the latest, the Petitioner's admission of liability on December 19, 2014, or January 14, 2015, in the appeal) served as the notice of demand.
• Interim Order Not a "Notice of Demand": The Court clarified that the interim order dated March 25, 2015, passed by the Chief Controlling Revenue Authority, could not be construed as the "notice of demand." This order merely facilitated the deferment of penalty adjudication on the condition of paying the already admitted stamp duty.
• Default Despite Payment: Since the payment was made on March 27, 2015, it fell well beyond 60 days from any of the aforementioned earlier dates of demand or admission of liability. Consequently, the default in payment within the statutory 60-day period triggered the penalty provision, with the penalty calculated from the date of the instrument (April 11, 2008).
• Misuse of Provisions: The Court observed that the Petitioner could not continually default on timely payments and then impose conditions on the authorities for paying the admitted stamp duty. This conduct, in the Court's view, amounted to misusing the law's provisions.

Conclusion:

The High Court dismissed the petition, discharged the rule, and vacated the interim stay previously granted. The levy of penalty amounting to Rs. 9,76,03,385 was confirmed, with the Petitioner directed to pay the sum within four weeks. This judgment serves as a clear reminder for parties to adhere strictly to statutory timelines for stamp duty payments to avoid significant penalties.

BOMBAY STAMP ACT, 1958