State Cannot “Unjustly Enrich Itself” By Denying Refund Of Wrongly Paid Stamp Duty Over Delay: Bombay HC
The Bombay High Court has held that the government cannot retain stamp duty wrongly paid by a citizen merely because there was a short delay in seeking a refund. The Court said procedural delay cannot defeat a person's substantive right to recover money mistakenly paid under a wrong stamp duty head, particularly when the transaction could not proceed further.
A single-judge bench of Justice Milind N. Jadhav observed that the state cannot “unjustly enrich itself” by forfeiting money paid due to an inadvertent mistake. The court reproduced the Supreme Court's observation that the State should not ordinarily rely on technicalities while dealing with citizens.
"I am of the clear opinion that a litigant cannot be penalized for an inadvertent mistake and error whereby he is deprived of his hard earned money to the Government on the basis of such incorrect and wrong step taken by him.,” the court observed.
The court further held that limitation may bar the remedy but not the substantive right to claim refund. It said the petitioner's entitlement to recover wrongly paid stamp duty could not be defeated solely on procedural technicalities.
The case concerned whether refund of stamp duty could be denied merely because the refund application was filed beyond the six-month limitation period under Section 48(3) of the Maharashtra Stamp Act, 1958. The duty had been paid under a wrong head by mistake, and the agreement could not proceed to execution and registration.
The petitioner had purchased e-stamps worth Rs. 3,00,100 for the execution of an agreement for the sale of a flat. However, while making the online payment, he mistakenly selected the scheme code “consolidated stamp duty and Superintendent of Stamps” instead of “non-judicial stamps."
Because of this error, the agreement could not be executed or registered.
After discovering the mistake, the petitioner sought a refund before the Collector of Stamps, Borivali. The application was rejected because it was filed after eight months and seven days from the date of purchase of the e-stamps, beyond the six-month limitation period prescribed under Section 48(3).
The petitioner's appeal before the Chief Controller Revenue Authority was also rejected solely on the ground of a delay of two months and eight days.
Before the High Court, the petitioner argued that Article 265 of the Constitution prohibits the state from collecting tax except by authority of law. He contended that the amount was paid under a wrong head by mistake and could not be retained merely because of delay. The petitioner also relied on medical records to explain the delay in filing the refund application.
Opposing the petition, the state argued that the six-month limitation under Section 48(3) was mandatory and sacrosanct. It further contended that the petitioner had voluntarily deposited the amount and therefore could not allege illegal collection by the government.
The High Court noted that both authorities had rejected the refund claim only on the ground of delay. The impugned orders themselves did not dispute that the wrong scheme code had been selected inadvertently.
The court held that once stamp duty was paid under a wrong head and the agreement could not proceed further, the petitioner had clearly made out a case for refund.
The court also observed that the Maharashtra Stamp Act does not expressly prohibit condonation of delay. Relying on the Supreme Court's decision in Committee-GFIL v. Libra Buildtech Pvt. Ltd., the Court reiterated that expiry of limitation may bar the remedy but not the substantive right itself.
Accordingly, the High Court quashed the orders passed by the Collector of Stamps and the Chief Controller Revenue Authority. The court directed refund of Rs. 3,00,100 to the petitioner along with 4% simple interest within four weeks.
For Petitioner: Advocate Charanjeet Singh Chanderpal
For Respondents: AGP V.S. Nimbalkar, Amol Ghayal, Supervisor, Collector Stamps, Borivali present