Supreme Court Upheld State's Stamp Duty Demand in Indian Stamp Act Case Concerning Mortgage Deed Executed in Uttar Pradesh but Stamped with West Bengal Stamps. The instrument was not duly stamped in Uttar Pradesh because it lacked Uttar Pradesh stamps, as required by Section 2(ii) and Section 3 of the Indian Stamp Act, 1899, and the Uttar Pradesh Stamp Rules.

Writ petition under Article 32 of the Constitution challenging Board of Revenue order that mortgage deed executed in Uttar Pradesh but stamped with West Bengal stamps was not duly stamped and demanding deficit stamp duty of Rs.1,74,000.

Petitioners sought a writ of certiorari to quash the Board of Revenue order dated August 11, 1961; a writ in the nature of mandamus directing the Member, Board of Revenue, Uttar Pradesh, Board of Revenue, Uttar Pradesh, and Collector of Varanasi to forbear from acting on the order; alternatively, a mandamus directing the State of West Bengal to refund Rs.1,08,751 stamp duty illegally exacted under circular dated August 2, 1954.

The Board of Revenue held that the original mortgage deed dated March 22, 1957 was not duly stamped because it was executed in Uttar Pradesh but bore West Bengal stamps, and demanded deficit stamp duty of Rs.1,74,000 before the substitution deed could be stamped at concessional rate.

Board of Revenue, Uttar Pradesh decision dated August 11, 1961; Collector of Varanasi letter September 8, 1961; Tehsildar, Chandauli, Varanasi letter November 17, 1961 demanding payment.

Whether an instrument executed in Uttar Pradesh but bearing stamps overprinted with West Bengal is duly stamped before a public officer of Uttar Pradesh. Whether Rule 3 of the Uttar Pradesh Stamp Rules is unconstitutional as an unreasonable restriction under Article 19(1)(f) and (g) of the Constitution. Whether the West Bengal circular dated August 2, 1954 is null and void, and whether the State of West Bengal illegally exacted Rs.1,08,751 from the petitioner.

Petitioners argued that the document cannot be said to be unstamped unless it comes within the mischief of Section 15 of the Stamp Act, so the Board was wrong in holding that the mortgage deed of March 22, 1957 could not be properly stamped unless it bore Uttar Pradesh stamps. Petitioners contended that they had already paid stamp duty in West Bengal to the extent of Rs.1,08,751 after proper adjudication by the Collector of Stamps, Calcutta, based on a West Bengal circular dated August 2, 1954. Petitioners challenged Rule 3 of the Uttar Pradesh Stamp Rules as unconstitutional on the ground that it constituted an unreasonable restriction on their fundamental rights under Article 19(1)(f) and 19(1)(g) of the Constitution. Alternatively, petitioners argued that the West Bengal circular dated August 2, 1954 was null and void and that the State of West Bengal had illegally exacted the sum of Rs.1,08,751 without authority of law.

An instrument executed in one State is liable to stamp duty in that State; to be duly stamped it must bear stamps of the amount and description in accordance with the law of that State, including rules. Stamp law includes not only the Act but also the rules framed under the Act. If an instrument becomes liable to duty in two States, it must first be stamped according to the law of the first State; if the second State's rate is higher, only the excess amount needs to be stamped according to the second State's law.

Where an instrument executed in Uttar Pradesh and consequently liable to stamp duty under the Indian Stamp Act as amended in Uttar Pradesh but relating to property in West Bengal bears stamps overprinted with the name of West Bengal comes before a public officer of Uttar Pradesh, is such officer right in holding that the instrument is not duly stamped inasmuch as it does not bear stamps overprinted with the-name of Uttar Pradesh? That is the principal question which has arisen in this petition under Art. 32 of the Constitution. The instrument can be said to be duly stamped only if it bears stamps of the amount and description in accordance with the law of the State concerned. The law includes not only the Act but also the rules framed under the Act.

The first petitioner, a company with registered office at Calcutta, owned a factory at Varanasi in Uttar Pradesh and jute mills in West Bengal. The State of Uttar Pradesh agreed to advance a loan of Rs.1,45,00,000 on mortgage of the company's West Bengal assets. The mortgage deed was executed at Lucknow, Uttar Pradesh, on March 22, 1957, with West Bengal stamps of Rs.1,08,751, and registered at Calcutta on April 5, 1957. On March 23, 1957, a deed of substitution was executed and duly stamped and registered in Uttar Pradesh. In 1960 the company sought further substitution of security, sending a draft deed to the Collector of Varanasi. The Collector referred the matter to the Board of Revenue, Uttar Pradesh, which on August 11, 1961 held that the original mortgage deed must bear Uttar Pradesh stamps and that the company was liable to pay Rs.1,74,000 as deficit stamp duty. The Collector of Varanasi informed the company by letter dated September 8, 1961, and the Tehsildar, Chandauli, Varanasi demanded payment by letter dated November 17, 1961. The company replied on November 30, 1961, asking for a month's time, and filed the present petition under Article 32 on December 22, 1961.

• Indian Stamp Act, 1899 (2 of 1899): Section 2(ii), Section 3 (as amended in Uttar Pradesh and West Bengal), Section 19A, Rule 3
• Uttar Pradesh Stamp Amendment Act, 1958: Article 40(c) of Schedule 1-B
• Constitution of India: Article 32, Article 19(1)(f), Article 19(1)(g)