1. Heard Sri Udayan Nandan, learned counsel for the petitioner and perused the record.
2. This writ petition under Article 226 of the Constitution of India has arisen from the orders passed by stamp authorities raising a demand on account of deficiency of stamp duty in respect of a transaction of sale whereby the petitioner has purchased an industrial unit of M/s Gauri Steels and Alloys (P) Ltd. for consideration of Rs. 23,20,000/- and paid stamp duty of Rs. 33,600/-. The Sub-Registrar made reference under Section 33/47-A of Indian Stamp Act, 1899 (hereinafter referred to as the "Act, 1899") whereafter a show cause notice was issued to petitioner and after considering reply dated 01.01.1996, the Additional Collector (Finance & Revenue), Bahraich, vide order dated 30.01.1996, has determined market value of entire property under transaction, as Rs. 118 lacs, whereupon the stamp duty chargeable comes to Rs. 17,11,000/-, hence deficiency of Rs. 13,74,600/- has been determined and demanded from the petitioner. Penalty of Rs. 13,74,500/- has also been imposed upon petitioner.
3. Against aforesaid order, the petitioner preferred revision which has been dismissed by Chief Controlling Revenue Authority, U.P., Allahabad, vide order dated 06.12.2001.
4. Learned counsel for the petitioner submitted that the value of plant and machinery ought not to have been included in the sale consideration and the Revenue Authorities have committed a patent error of law in including the value of plant and machinery and other item as the same were liable to be treated as "movable property". It is however not in dispute that the entire industrial unit was purchased alongwith its land, building, plant, machinery etc. for a total consideration of Rs. 118 lacs but the stamp duty was paid on partial sale consideration of Rs. 23,20,000/-, treating it to be the value of land and building only.
5. The only question up for consideration is, "whether plant and machinery, in the present case, have rightly been included towards part of sale transaction of immoveable property so as to attract chargeability of stamp duty on entire consideration of Rs. 118 lacs".
6. Copy of sale deed dated 04.03.1995 is Annexure-2 to the writ petition. Para 3 thereof shows that the U.P. Financial Corporation took over possession of entire industrial unit of M/s Gauri Steel & Alloys (P) Ltd., situate at Plot No. 217, Mauza Vishunpur Rahu, Pargana, Tehsil and District Bahraich by exercising its power under Section 29 of State Financial Corporation Act, 1951 and the entire mortgaged property together with free hold right of land, building etc. was transferred to vendee, i.e., petitioner, vide para 4 of the sale deed.
7. Learned counsel for the petitioner has not disputed that another agreement was executed between parties on 02.03.1995 (Annexure-7 to the writ petition), whereby entire property, building, plant and machinery was shown as purchased by petitioner for a total consideration of Rs. 118 lacs. Para 5 thereof would be relevant to reproduce hereat:
"5. It is agreed between the corporation and the purchaser that the former will sell and later will purchase the entire mortgaged properties together with the free hold/lease hold land, building, plant and machinery etc. on as is where is basis more specifically stated in the schedule attached herewith."
8. For total consideration of Rs. 118 lacs, Rs. 35 lacs were already deposited by petitioner and balance Rs. 82.60 lacs were to be paid in installments of Rs. 10.32 lacs payable in August, 1995; February, 1996; August, 1996; February, 1997; August, 1997; February, 1998; August, 1998; and, February, 1999 together with interest at the rate of Rs. 18% per annum. It is also not disputed by learned counsel for the petitioner that plant and machinery was fixed throughout. It is thus evident that petitioner has purchased entire industrial undertaking, alongwith its building, plant and machinery, for a total consideration of Rs. 118 lacs, but in order to evade stamp duty, in the sale deed in question, in a clandestine manner, the words land, building etc. have been used and partial sale consideration alleging to be the value of only land and building has been set forth as market value of property under transfer, excluding other properties which have also been purchased in the single sale transaction.
9. Learned counsel for the petitioner argued that "plant and machinery" even if attached to earth, but since it is/was removable, therefore, it is/was a moveable property, and not chargeable for stamp duty for the purpose of the document in question.
10. In my view the orders impugned in this writ petition are perfectly valid and just, except to the extent of penalty, which has been imposed upon petitioner though no such power vested in the authorities at that time.
11. Now coming to first part of the matter, whether sale consideration of plant and machinery etc. is chargeable alongwith building and land, I find that it is not disputed that plant and machinery in the case in hand is the one which is affixed to earth or to the things embedded to earth. Now the only question which is to be considered is, whether these items can be termed as "moveable property" or "immoveable property".
12. The term "immoveable property" has been defined in General Clauses Act (Central), 1897 and reads as under:
"'immovable property' shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth."
13. Under Section 3 of the Transfer of Property Act 1882 (hereinafter referred to as "Act, 1882") the term "immoveable property" has also been defined and it reads as under:
"immoveable property" does not include standing timber, growing crops or grass."
14. Whether plants and machinery set up in a factory premises, fastened to earth or things attached to earth, can be held to be a moveable or immoveable property, came to be considered before this Court in Official Liquidator Vs. Sri Krishna Deo and Ors., AIR 1959 All 247. The Court appointed an Advocate Commissioner to inspect premises of company to ascertain whether machinery and plants were fixed and attached to earth or not. The report submitted shows that plants and machinery of company were either embedded in the earth or permanently fastened to things attached to earth. On behalf of State, argument was raised that most parts of machinery are fixed to their bases with bolts and nuts, and can be removed by removing the nuts. It thus cannot be said that such machineries are permanently fastened inasmuch as, the same can be moved away by removing the nuts and hence should be held "movable property". The argument was noticed and rejected, by following House of Lords decision in Reynolds Vs. Ashby & Son, 1904 ACJ 466, wherein Lord Lindley has observed:
"The purpose for which the machines were obtained and fixed seems to me unmistakable; it was to complete and use the building as a factory. It is true that the machines could be removed if necessary, but the concrete beds and bolts prepared for thorn negative any idea of treating the machines when fixed as movable chattels."
15. This decision in Official Liquidator Vs. Sri Krishna Deo (supra) has been affirmed and approved in Duncans Industries Ltd. Vs. State of U.P. and Ors., AIR 2000 SC 355. The Court held :
"We are inclined to agree with the above finding of the High Court that the plant and machinery in the instant case are immovable properties. The question whether a machinery which is embedded in the earth is movable property or an immovable property, depends upon the facts and circumstances of each case. Primarily, the court will have to take into consideration the intention of the parties when it decided to embed the machinery whether such c was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machineries involved clearly shows that the machineries which have been embedded in the earth to constitute a fertiliser plant in the instant case, are definitely embedded permanently with a view to utilise the same as a fertiliser plant. The description of the machines as seen in the Schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show that the purpose for which these machines were embedded was to use the plant as a factory for the manufacture of fertiliser at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted. Nor can it be said that the plant and machinery could have been transferred by delivery of possession on any date prior the date of conveyance of the title to the land."
16. The decision in Sirpur Paper Mills Vs. Collector of Central Excise Hyderabad, AIR 1998 SC 1489 was distinguished observing that it was on account of particular facts in that case that plants and machinery, therein was found moveable property. However, where there is no agreement to severe machines and plants and entire factory is leased out with plants and machinery, which are fastened to earth or attached or fixed to the things permanently attached to earth and such positions is necessary for the purpose of beneficiary enjoyment thereof, it would be an "immoveable property" and no otherwise view can be taken. This is how the facts of this case also find distinction from what was involved in Sirpur Paper Mills Vs. Collector of Central Excise Hyderabad (supra).
16. Whether chattel attached to the earth or building constitute an immoveable property, would depend upon degree, manner, extent and strength of attachment of chattel to earth or building. Broadly speaking, there are certain broad features, which are to be looked into in such cases. The attachment should be such as to partake the character of attachment of trees or shrubs, rooted to earth, or walls or buildings, embedded in that sense, and, further test is whether, such an attachment is for permanent beneficial enjoyment of immovable property to which it is attached. For a property and to be regarded as such property, it must become attached to immovable property as permanently as a building or a tree is attached to earth. If, in the nature of things, the property is a movable property and for its beneficial use or enjoyment, it is necessary to embed it or fix it on earth, though permanently, that is, when it is in use, it may not be regarded as immovable property, but not otherwise.
17. The term "permanently fastened or attached to earth" has to be read, in the context, for the reason that nothing can be fastened to earth permanently, so that it can never be removed. When machines are attached to earth, not only they are attached for beneficial enjoyment of machines but also for beneficial enjoyment of land which is on lease. A similar question came up before Rajasthan High Court also in C.T.O. Vs. Sadulshahar Krai Vikrai Sahkari Samiti, 2004 (135) STC 90, and learned Single Judge, said in para 31 of the judgment, as under:
"If a comprehensive reading is done of all the relevant provisions, then what goes to show that the whole factory premises including the plant, machinery, land and building were given on lease. A lease of entire establishment was necessary for beneficial enjoyment of rights under the lease. If from the lease, plant and machinery is excluded, the land could not have been used for any purposes designed to be fulfilled by lease. The machinery and plant embedded to earth to give it a character of immovable property for beneficial use of land facilitated the lease otherwise, the lessee would not take the premises on lease and land could only be used if the plant and machinery was attached to earth. Thus, according to the definition of "plant and machinery" as contained in General Clauses Act, makes it a immovable property."
18. In the present case it is not disputed that besides plants and machinery, entire land and building was sold and there was no provision/agreement that plants and machinery shall be severed or removed from earth. In fact, the industrial unit has been leased out for the purpose of running. Removal of plants and machinery would not have allowed the factory to run. There is no agreement between parties that plants and machinery shall be severed or removed from earth.
19. Even according to definition of 'goods' under Sale of Goods Act, in my view it cannot be included therein. One has to understand the concept of fastening of plants and machinery to earth or its fixing or attached to earth in a reasonable and practicable manner. Scientifically speaking, nothing can be treated immoveable. In the context of plants and machinery, where it is permanently fastened or attached to earth, it has to be seen from the point of utility also. If it cannot be used without being attached to earth, it may be immovable property in the industries like one up for consideration in this matter. Unless, such fastening is there, the plant and machinery cannot be put to a rational use. They generally do not move or taken away unless a particular plant and machinery has become obsolete or when the factory is closed or otherwise circumstances so warrant and the owner decide to remove and sell it. Such contingency do not arise every day. They are very rare and occasional. Removal of plants and machinery from earth in a working unit is a decision which is not normally taken in ordinary circumstances, that too when entire land, building along with machinery is leased out for the purpose of running the same.
20. It is worthy to mention that in the entire writ petition there is no pleading that the plant and machinery which has been purchased by petitioner is to be removed or displanted or that it is not affixed or attached to earth etc. Though it has been pleaded that only land and building has been purchased but paras 3 and 4 of sale deed clearly show that U.P. Financial Corporation took over physical possession of entire building and its assets. In para 4 it is mentioned that entire mortgaged property including free hold rights of land, building etc. on as is where is basis transferred to vendee, i.e., petitioner.
21. In view of above, I find no error on the part of respondents-Revenue Authorities in holding that stamp duty was chargeable on entire sale consideration of Rs. 118 lacks and to this extent the impugned orders warrants no interference.
22. Now coming to second aspect regarding penalty, I find that the transaction of sale took place on 02.03.1995 and the impugned order was passed by Additional Collector (Finance & Revenue), Bahraich on 30.01.1996. On that day under Section 33/47-A of Act, 1899 there was no provision empowering Collector to impose penalty in case the value of property set forth in document presented for registration is not true market value of the entire value and there is a deficiency of stamp duty. Such a provision has been brought in statute book by amendment made in U.P. vide Act No. 38 of 2001. This amendment is not retrospective. The law before aforesaid amendment was clear that no penalty could have been imposed and, therefore, imposition of penalty in the present case is without jurisdiction. A Full Bench decision of this Court in Girish Kumar Srivastava Vs. State of U.P and others, 1998 (1) All.C.J. 199, has held that in the absence of any provision authorizing the Collector to impose penalty, the same cannot be imposed.
23. The Full Bench, referred to above, approved earlier Division Bench judgment of this Court in Kaka Singh Vs. Additional Collector and District Magistrate, (Finance and Revenue) Bulandshahr, AIR 1986 All 107. This has been reiterated in a recent Full Bench judgment in Ramesh Chandra Srivastava vs. State of U.P., AIR 2007 Alld. 39.
24. In view thereof, the writ petition is partly allowed. The impugned orders dated 30.01.1996 and 06.12.2001, in so far as penalty of Rs.13,74,500/- has been imposed upon petitioner, being wholly without jurisdiction, cannot be sustained and are hereby set aside. Rest part of orders is held valid and to that extent the writ petition shall stand dismissed.
25. In view of partial success of both the sides, there shall be no order as to costs.
Order Date :- 07.03.2014 AK