In this Article, the author walks reader through the concept of Stamp Paper and ponders upon the validity of a Stamp Paper!
What is a Stamp Paper?
It is a piece of paper which bears a pre-printed revenue stamp. Any transaction gets legal validity, once being executed on a stamp paper of proper value. It brings legal authenticity to any valid agreement.
What documents need to be executed on the Stamp Paper?
Be it an agreement or a documented business transaction; if legal sanctity need to be added, one should execute it on the legal stamp paper.
Documents like Lease Agreement, Sale deed, Loan Agreement, Affidavits, Memorandum of Association or Article of Association; need to be executed on the stamp paper.
However, all documents are not to be executed post payment of Stamp Duty. A few documents are exempt from it. One can have a look into the Schedule I of the Stamp Duty Act, to understand the same.
Types of Stamp Papers:
- Judicial Stamp Papers
- Non Judicial Stamp Papers
Judicial Stamp Papers:
Judicial stamp papers are used for legal purposes. If any legal document need to be submitted for the purpose of legal procedure; then, applicant execute the same in Judicial Stamp Papers.
These are often called as, Court Fee Stamp Papers. These Stamp Papers are used to avoid Cash Transactions in the Court. A case might not get admitted, if court fees is not paid properly.
Non Judicial Stamp Papers:
Whenever someone enters into a transaction and intends it to give legal sanctity; then such transaction are documented in the stamp papers of proper value.
State Government charges tax for any of such transaction. Hence, State Governments decide the rates of stamp duty to be paid. Therefore, every states have its own rates.
Validity of a Stamp Paper
What is the validity of a Stamp Paper?
Is it 6 months or 3 years; from the date of buying such documents? There is an ambiguity, when it comes to this question.
The answer is, there is no expiry date / limited validity of a Stamp Paper. Once you buy a Stamp Paper; it remains valid till perpetuity.
Stamp Act is silent upon the expiration of a Stamp Paper.
The Indian Stamp Act, 1899
What is the 6 Months Rule in the Stamp Act?
Section 54 of the Stamp Act provide, that if a person has an unused Stamp Paper; he/she can return it to the Collector within 6 months of buying it and seek refund.
Such Stamp Paper shall not be spoilt, rendered unfit or useless while returning the same.
Such person will get the refund with 10% deduction.
The stipulation of period of six months prescribed in Section 54 is only for the purpose of seeking refund of the value of the unused stamp paper, and not for use of the stamp paper
Thiruvengada Pillai v. Navaneethamal
What will happen if return is made after 6 Months?
In such situation. There will be no refund. Section 54 provides for the timeline, in which any of such person could seek refund; on return of the papers.
Can Spoilt Stamps be returned?
Not all spoilt stamps are redundant. There are many such stamp papers; which could be returned and refund could be sought.
Section 49 provides for such instances.
Following are such instances:
- If the paper is spoiled by a writing error or any other means rendered unfit for the purpose intended before it is executed by any person.
- If it is written out wholly or in part; but which is not signed or executed by any party
For other such instances. Refer Section 49 of the Act.
What if refund is sought after 6 months?
In many cases, applicant fails to apply for refund within 6 months of buying/spoiling of the Stamp Papers. In such situation party argues in Court that, there was inevitable situation due to which; they could not approach the authority for the refund.
However in many cases, parties relies on Delhi High Court Judgment of Dr. Poornima Advani v. Government of Delhi.
Court here permitted a refund of a lost stamp paper. Court relied on the rationale, that, State cannot adopt the principle of retention and receive undue enrichment. The issue here though was not regarding the limitation under Section 50. The issue here was, Whether the case of lost stamp, not covered under Section 49 be construed as a spoilt stamp?
The Courts have been looking into the facts and circumstances, before granting the relief. It is advisable that the parties stick to the to the strict deadline under Section 50 the Act.
Are Courts lenient toward the State Government or Parties?
Supreme Court in the case of Govt. of Andhra Pradesh v. P. Laxmi Devi; was dealing with the Constitutional validity of Section 47A of the Indian Stamp Act.
Court in that case relied on RK Garg v. Union of India. It held that
Laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc.
RK Garg v. Union of India
It is clear that the court exercise Judicial restraint in dealing with such case and leaves it to the State’s wisdom.
Fiscal / taxation statutes must be interpreted strictly and literally; reasons of hardship given for belated applications do not warrant any relaxation.
ALD Automative Pvt. Ltd. v. The Commercial Tax Officer
A stamp paper should be returned within 6 months, if remained unused. There are circumstances, in which refunds are not made. For example, the stamp paper gets spoiled or limitation period crosses.
Even in such cases, sometimes, the limitation or adverse conditions are condoned. However, the laws are interpreted in literal / strict sense and Court restrains from undue interference with the economic legislation.