Power of Parliament in respect of stamp duty –

Parliament can make law in respect of Stamp Duty. It can prescribe rates of stamp duty. The stamp duty rates prescribed by Parliament in respect of bill of exchange, cheques, transfer of shares etc. will prevail all over India. However, other stamp duty rates prescribed by Parliament in Indian Stamp Act, 1899 (e.g. stamp duty on agreements, affidavit, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney, security bond etc.) are valid only for Union territories. In case of States, the rates prescribed by individual States will prevail in those States.

Powers of State Government of Stamp Duty – State Government has powers to fix stamp duties on all documents except bill of exchange, cheques etc. Rates prescribed by State Government will prevail in that State. State Government can make law for other aspects of stamp duty also (i.e. matters other than quantum of duty). However, if there is conflict between State law and Union law, the Union law prevails [Article 254 of Constitution].

The Indian Stamp Act, 1839 is a Central legislation and deals with all aspects of stamps and stamp duties. It applies to whole of India except the State of Jammu & Kashmir. The Act through Schedule-1 lays down the rate of stamp duty payable on different instruments.

The instruments given in the Schedule-1 can be classified into two categories. First category of instruments consisting of bills of exchange, promissory notes, stamp duty for transfer of shares, debentures, bills of lading, proxies, letters of credit and receipts.

Second category of instruments consist of instruments such as agreements, affidavits, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney, security bond etc..

Vide entry 91 of List 1 central government is empowered to levy stamp duty in respect of first category of instruments and rates prescribed by Central Government will prevail over the rates prescribed by the state Government

Vide Entry 44 of List III and Entry 63 of List II, the State Governments have power to enact and levy stamp duty and prescribe the rates for all other instruments not referred above.

In the case of Second category of instruments, the rates prescribed by individual States will prevail in those States. However for these instruments, the rates prescribed in Scheudle-1 of the Indian Stamp Act, 1839 will be applicable only for union territories. If there is any conflict between State law and Union law, the Union law prevails as per Article 254 of Constitution.

It is clear from the scheme of legislation that fields for levy of stamp duty are central and state are demarcated so as to ensure that revenues collected through stamp duty are shared as per provisions of the Act.

Only under Sec, 52 B (a) of  The Bombay Stamp Act 1958, period of six months is mentioned from the date of purchase or delivery after which the stamps become invalid.

This time period of six months is also quantified under the The Bombay Stamp (Gujarat Amendment Act) 2004 under Section 52C which is applicable in Gujarat.

None of the other State Stamp Acts has such provision to limit the validity of stamps.

Recently, in Thiruvengada Pillai vs Navaneethammal & Anr  passed on 19 February, 2008 by  the bench  Bench: R V Raveendran, P.Sathasivam (2008 (4) SCC 530. )

The Hon’ble Supreme Court said that ,  “The Indian Stamp Act, 1899 nowhere prescribes any expiry date for use of a stamp paper. Section 54 merely provides that a person possessing a stamp paper for which he has no immediate use (which is not spoiled or rendered unfit or useless), can seek refund of the value thereof by surrendering such stamp paper to the Collector provided it was purchased within the period of six months next preceding the date on which it was so surrendered. The stipulation of the 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. Section 54 does not require the person who has purchased a stamp paper, to use it within six months. Therefore, there is no impediment for a stamp paper purchased more than six months prior to the proposed date of execution, being used for a document.”

The stipulation of the period of six months prescribed in section 54 of The Indian Stamp Act, 1899, for the purpose of seeking refund of the value of the unused stamp paper is also contained in most State Stamp Acts under Chapter V – Allowances for Stamps in Certain Cases. However, there is no time period limiting the validity of Stamps to six months except under the Bombay Stamp Act, 1958.

Further, under The Indian Registration Act, 1908:

All documents except Wills have to be registered within four months from the date of execution (signature). If a document is executed out of India, the period of four months will be counted from the date of its receipt in India. (Section 23)

In the event of a delay, the Act provides that the document may be presented within another four months with a penalty of maximum of ten times the registration fees, if the District Registrar grants permission. It prescribes four months time to the executant for appearing before the registering officer to admit execution thereof. (Section 34)

I think this is the main reason why people state that stamps are valid for only six months.

The judgment passed by the Supreme Court has now set the point clear. However, in Bombay and Gujarat, since there is conflict between Central Act and State Act, then vide Article 254 I believe Central Act will prevail. For more details, get in touch with our office here.