Punjab and Haryana High Court Quashes ₹59.77 Lakh Stamp Duty Demand Initiated Beyond Limitation

The Punjab and Haryana High Court on 15 July held that proceedings for recovery of deficient stamp duty cannot be initiated after the expiry of the statutory limitation period, and that stamp duty liability must be determined based on the market value and nature of the property as they existed on the date of execution and registration of the sale deed.

Justice Kuldeep Tiwari allowed a writ petition filed by Sandeep Singh and another and set aside the orders passed by the Collector and the Commissioner directing the petitioners to pay Rs. 59.77 lakh towards deficient stamp duty and registration charges, along with 12 per cent annual interest, for a sale deed executed on 5 July 2018. He observed:

“...Such a belated assessment of the nature and value of the land is of no significance in fastening the petitioners with the liability to pay enhanced stamp duty. The scheme of the Stamp Act requires the Collector to determine the market value of the land as it existed on the date of execution and registration of the sale deed…”

The dispute arose from a sale deed executed and registered on 5 July 2018, after which the Collector initiated proceedings alleging that the land covered under the transaction should have been valued as commercial property for payment of stamp duty.

Petitioners challenged the proceedings, contending that they were initiated beyond the three year limitation period prescribed under the Stamp Act and were therefore barred by law. They also relied on a report of the Sub Registrar stating that the land fell within the revenue estate of Mansa Khurd and was not commercial in nature.

The State defended the proceedings, submitting that the Collector's spot inspection revealed that the property was situated amid commercial establishments and that commercial rates were therefore correctly applied while calculating stamp duty.

The Court observed that it was undisputed that the proceedings were initiated more than three years after registration of the sale deed. It held that the limitation period prescribed under the Stamp Act for initiating recovery proceedings was mandatory and that the Collector lacked jurisdiction to commence proceedings after the expiry of the prescribed period.

It relied on its earlier decision in Shree Krishna Enterprise v. State of Haryana while holding that the Collector could not assume jurisdiction after the statutory period had elapsed. The Bench further held that the Collector committed an additional error by relying on a spot inspection conducted more than four years after execution of the sale deed to determine the nature and value of the property. It held:

“...The liability to pay stamp duty cannot be determined on the basis of subsequent developments in the area or the appreciation in the value of the land owing to later developments. The Collector, while determining the alleged deficiency, took into account the circumstances existing at the time of the inspection rather than the position as it existed on the date of execution of the sale deed…”

Further, the Court observed that subsequent commercial development or increase in the value of the property could not be considered for determining stamp duty liability, as the relevant consideration was the nature and user of the property on the date of execution and registration of the sale deed.

Relying on the Supreme Court's decision in State of U.P. v. Ambrish Tandon, it reiterated that subsequent commercial use of a property was not a relevant criterion for determining stamp duty. The nature and user of the property on the date of purchase alone would determine the stamp duty liability.

Accordingly, the High Court held that the Collector and the Commissioner had failed to apply the correct legal principles, set aside the impugned orders and allowed the writ petition.

For Petitioner: K.B. Raheja, Advocate 

For Respondent: Sahil R. Bakshi, A.A.G., Punjab and Aniket Badoni, Advocate for the respondent No.5.