Case Title – Life Insurance Corporation of India vs. The State of Rajasthan & Ors.
Case No. – Civil Appeal No. 3391 of 2021
Dated on – 30th April, 2024
Quorum – Hon’ble Justice Pamidighatam Sri Narasimha and Hon’ble Justice Aravind Kumar
Facts of the Case –
The appellant, a life insurance company, was subjected to demands by the State of Rajasthan for stamp duty on insurance policies issued within the state, pursuant to the Rajasthan Stamp Law (Adaptation) Act, 1952. The company, facing a lack of availability of India Insurance Stamps in Rajasthan, purchased these stamps from Maharashtra based on a letter from the Treasury Officer, Jaipur, which indicated that the central government’s insurance stamps were not available through the state. The state authorities-initiated proceedings for recovery of stamp duty, asserting that the stamps should have been procured within Rajasthan. The appellant contended that their actions were consistent with the Indian Stamp Act, 1899, as interpreted in the VVS Rama Sharma case, where it was held that purchasing stamps from outside the state did not constitute an offense. However, the High Court ruled against the appellant, leading to the current appeal before the Supreme Court, which involved questions of legislative competence, the applicability of the relevant state law, and the procedural propriety of the state’s demands for stamp duty.
Issues –
- Whether the 1952 Act or the 1998 Act applies to the facts of the present case?
- Whether the state government has the legislative competence to impose and collect stamp duty on policies of insurance as per Entry 91 of List I read with Entry 44 of List III?
- Whether the 1952 Act requires the purchase of insurance stamps from and payment of stamp duty to the Rajasthan government for insurance policies issued within the state?
- Whether, in the facts of the present case, the appellant is liable to pay stamp duty?
Legal Provisions –
- Article 254 of The Constitution of India, 1950
- Article 265 of The Constitution of India, 1950
- Section 3 of Indian Stamp Act, 1899
- Section 74 & 75 of Indian Stamp Act, 1899
Contentions of the Appellant –
The appellants contended that the imposition of stamp duty by the State of Rajasthan on insurance policies issued within the state, under the Rajasthan Stamp Law (Adaptation) Act, 1952, was unjustified as they had to purchase India Insurance Stamps from Maharashtra due to their unavailability in Rajasthan, as confirmed by the Treasury Officer’s letter dated October 7, 1991. They argued that the High Court erred in overlooking this evidence and in failing to recognize the applicability of Section 3A(4) of the 1952 Act, which excluded instruments under Entry 91, List I from cash payment of stamp duty in the absence of adhesive or impressed stamps. The appellants further relied on the precedent set by VVS Rama Sharma, asserting that purchasing insurance stamps from outside the state did not violate any legal provisions and should not attract penalty or demand for additional stamp duty. They maintained that the stamp duty regime was improperly applied and that their actions were consistent with the Indian Stamp Act, 1899, making the state’s demands invalid and their recovery proceedings unlawful.
Contentions of the Respondent –
The respondents contended that the appellants were legally obligated to pay stamp duty on insurance policies issued within the State of Rajasthan, as mandated by the Rajasthan Stamp Law (Adaptation) Act, 1952. They argued that the state legislature had the authority to impose and collect stamp duty under Entry 44 of List III, as prescribed by the Parliament under Entry 91 of List I. The respondents maintained that the purchase of insurance stamps from outside the state amounted to evasion of stamp duty and resulted in the instruments being considered not duly stamped. They asserted that the appellants had the option to pay stamp duty in cash under Section 3A of the 1952 Act if the stamps were unavailable, but they failed to do so. Additionally, they differentiated the case from VVS Rama Sharma, emphasizing that the latter involved interpretation of rules under a central act without an applicable state law having Presidential assent, unlike the present case where the 1952 Act had received such assent and therefore prevailed over the central Act within Rajasthan. The respondents thus argued for the validity of the state’s demands for stamp duty and the initiation of recovery proceedings against the appellants.
Court Analysis and Judgement –
The Hon’ble Supreme Court analyzed the case by examining the applicability of the Rajasthan Stamp Law (Adaptation) Act, 1952 and the Rajasthan Stamp Rules, 1955, which mandate the imposition of stamp duty on insurance policies executed within the state. The Court held that the 1952 Act, a state law enacted under Entry 44 of List III and having received Presidential assent, prevailed over the Indian Stamp Act, 1899 within Rajasthan. Differentiating the case from VVS Rama Sharma, the Court noted that the latter involved the interpretation of central rules without an equivalent state law with Presidential assent. The Court further held that, despite the unavailability of insurance stamps within Rajasthan, Section 3A(4) of the 1952 Act, which excludes instruments under Entry 91, List I from its application, meant that the appellants could not have paid the stamp duty in cash as suggested by the High Court. Consequently, the Court upheld the legislative competence and jurisdiction of the state to levy and collect stamp duty on insurance policies but directed the state not to demand and collect the stamp duty as per the specified orders. Thus, the Court dismissed the appeals, affirmed the High Court’s judgment, and directed the parties to bear their own costs.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Judgement Reviewed by – Anurag Das
Click here to view the judgement
