Hon'ble Mahesh Chandra Tripathi,J.
(Per: Hon'ble V.K. Shukla,J.) Varanasi Builders and Developers Association through its Secretary Raman Singh is before this Court for a declaration that Rules 4 and 5 of U.P. Stamp (Valuation of Property) Rules, 1997 be declared ultra vires and further prayer has been made to quash the impugned rate list issued by the District Magistrate, Varanasi, in so far as it relates to enhancement of construction cost effective w.e.f. 1.8.2016.
Brief background of the case is that petitioner claims that its an association of builders and developers and in this background a society has been registered under the Societies Registration Act, 1860 with the name and style of Varanasi Builders and Developers Association. Petitioner claims that the members of the petitioner's association are engaged in the business of constructing multi-storied building, group housing and developing the residential colonies and at the point of time of purchase of land and at the time of sale of flats/plots the payment of stamp duty necessarily comes into play under the umbrella of the Indian Stamp Act, 1899 read with U.P. Stamp (Valuation of Property) Rules, 1997 and under the Stamp Act all kinds of instruments which are charged with the stamp duty are liable to be paid according to the rate prescribed in Schedule I and I-B of the Stamp Act. Section 33 of the Indian Stamp Act provides for examination and impounding of the instrument where the deficiency in the stamp duty paid on the instrument is found and Section 35 provides that instrument not duly stamped is inadmissible in evidence. Section 47-A of the Stamp Act provides for dealing with the instrument, conveyance etc. if the said instrument is undervalued and empowers the District Magistrate/Collector to recover the deficient amount with penalty. Certain instruments including the instrument of conveyance on which the stamp duty is payable on the market value of the property. In exercise of the power under Section 75 of the Indian Stamp Act, the State of U.P. has made U.P. United Province Stamp Rules, 1942 to carry out generally the purposes of the Act. The Stamp Rules, 1942 aforesaid were notified on 25.3.1942 and are in effect since then. Chapter XV of the Stamp Act, 1942 provides for rules for determining the market value of certain instrument and Rules 340 to 352 came into effect on 21.2.1970 and the Rules 340, 341, 344, 346, 349 and 352 in their present form came into force on 1.7.1976 vide notification dated 24.6.1976.
Rule 340 of the Stamp Rules, 1942 requires for disclosure of certain particulars in the instrument where the instrument is relating to immovable property if chargeable with an ad valorem duty. Rule 340 (a) empowers the District Magistrate to supply District Registrar and such other officers as the State Government may specify a copy of the statement showing classification of soil, circle rate and the average price of land appertaining to each such classification situate in every pargana, corporation or local body of his district.
Rule 341 of the Stamp Rules, 1942 provides for determining the minimum market value of immovable property and envisages that the same shall not be less than that as arrived on the basis of the multiples given in Sub Rules (I), (ii) and (iii) of Rule 341. For example, minimum market value of the bhumidhari land may be 800 times the land revenue; similarly the sirdari land may be 400 times the land revenue and where the land is not assessed to revenue 25 times the annual average of the profits and in case, the land is non-agricultural and is situate within the limits of any local bodies, equal to the value worked out on the basis of the average price per square meter prevailing in the locality on the date of instrument. Rule 340 of the Stamp Rules, 1942 provides for the governing principle for determining the minimum market value and the District Magistrate is bound to govern by such principle while determining the circle rate under Rule 340 (a) of the Stamp Rules, 1942. Purpose and object of introducing Section 47-A by U.P. Act No. 11 of 1969 was that State Legislature felt that stamp duty was being evaded on large scale in State by persons who were not valuing the instrument properly/correctly and same has been, thereafter, amended from time to time by U.P. Act No. 20 of 1974, 49 of 1975 and 6 of 1980. In this backdrop resolve was taken to fix minimum value of the property as per Rules and, accordingly, Rules have been framed known as U.P. Stamp (Valuation of Property) Rules, 1997. The District Magistrate, Varanasi, in exercise of authority conferred under 1997 Rules, has issued circle rate enhancing the rate of the land, building and construction cost, rent of the building in the rural area as well as in the urban area which has become effective w.e.f. 1.8.2016. Petitioner, at this juncture, is before this Court with the grievance that unguided powers have been conferred upon the District Magistrate for fixing the value of the property and such unguided powers run counter to the promise made to the citizens and, in view of this, as there are no guiding principle for guiding authority under Rules 4 and 5 of the 1997 Rules, the said provisions should be declared as ultra vires.
Sri H.N. Singh, Senior Advocate, assisted by Sri Kripa Shankar Singh, Advocate, submitted before us that Rules 4 and 5 of 1997 Rules are totally arbitrary for the reason that unguided power has been conferred to the District Magistrate for fixing the value of the property in question and there being further opportunity of appeal against the same, the provisions in question are per-se bad.
Learned Standing Counsel, on the other hand, has contended that rightfully the aforementioned Rules have been framed and the provisions in question are self contained and at the end of day the stamp duty is liable to be paid on the market value of the property in question, as such, no interference is required by this Court.
After respective arguments have been advanced, at the very outset, we proceed to examine the provisions of Sections 27, 47-A and 75 of the Indian Stamp Act, 1899, which reads as follows;
"27. Facts affecting duty to be set forth in instrument.- The consideration (if any) and all other facts and circumstances affecting the chargeability of any instrument with duty, or the amount of the duty with which it is chargeable, shall be fully and truly set forth therein.
(2) In the case of instruments relating to immovable property chargeable with an ad valorem duty on the value of the property, and not on the value set forth, the instrument shall fully and truly set forth the annual land revenue in the case of revenue paying land, the annual rental or gross assets, if any, in the case of other immovable property the local rates, Municipal or other taxes, if any, to which such property may be subject, and any other particulars which may be prescribed by rules made under this Act.
47-A. Under-valuation of the instrument.- (1)(a) If the market value of any property which is the subject of any instrument, on which duty is chargeable on the market value of the property as set forth in such instrument, is less than even the minimum value in accordance with the rules made under this Act, the registering officer appointed under the Registration Act, 1908, (Act no. 16 of 1908), notwithstanding anything contained in the said Act, immediately after presentation of such instrument and before accepting it for registration and taking any action under Section 52 of the said Act, require the person liable to pay stamp duty under Section 29, to pay the deficit stamp duty as computed on the basis of the minimum value determined in accordance with the said rules and return the instrument for presenting again in accordance with Section 23 of the Registration Act, 1908.
(b) When the deficit stamp duty required to be paid under clause (a) is paid in respect of any instrument and the instrument is presented again for registration, the Registering Officer shall certify by endorsement thereon, that the deficit stamp duty has been paid in respect thereof and the name and the residence of the person paying them and register the same.
(c) Notwithstanding contained in any other provisions of this Act, the deficit stamp duty may be paid under clause (a) in the form of impressed stamps containing such declaration as may be prescribed.
(d) If any person does not make the payment of deficit stamp duty after receiving the order referred to in clause (a) and presents the instrument again for registration, the registering officer shall, before registering the instrument refer the same to the Collector, for determination of the market value of the property and the proper duty payable thereon.
(2) On receipt of a reference under sub- section (1), the Collector shall after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under this Act, determine the market value of the property which is the subject of such instrument and the proper duty payable thereon.
(3) the Collector may, suo motu, or on a reference from any Court or from the Commissioner of Stamps or an Additional Commissioner of Stamps or from a Deputy Commissioner of Stamps or from an Assistant Commissioner of Stamps or any officer authorized by the State Government in that behalf, within four years from the date of registration of any instrument on which duty is chargeable on the market value of the property, not already referred to him under sub- section (1), call for an examine the instrument for the purpose of satisfying himself as to the correctness of the market value, of the property which is the subject of such instrument and the duty payable thereon, and if, after such examination, he has reason to believe that market value of such property has not been truly set forth in such instrument, he may determine the market value of such property and the duty payable thereon:
Provided that, with the prior permission of the State Government, an action under this sub-section may be taken after a period of four years but before a period of eight years from the date of registration of the instrument on which duty is chargeable on the market value of the property.
Explanation: The payment of deficit stamp duty by any person under any order of registering officer under sub-section (1) shall not prevent the Collector from initiating proceedings on any instrument under sub-section (3).
(4) If on enquiry under sub-section (2) and examination under subsection (3) the Collector finds the market value of the property-
(i) truly set forth and the instrument duly stamped, he shall certify by endorsement that it is duly stamped and return it to the person who made the reference;
(ii) not truly set forth and the instrument not duly stamped, he shall require the payment of proper duty or the amount required to make up the deficiency in the same together with a penalty of an amount not exceeding four times the amount of the proper duty or the deficient portion thereof.
[(4-A) The Collector shall also require alongwith the deficit stamp duty or penalty required to be paid under clause (ii) of sub-section (4), the payment of a simple interest at the rate of one and half percent per mensem on the amount of deficit stamp duty calculated from the date of the execution of the instrument till the date of actual payment:
Provided that the amount of interest under the sub-section shall be recalculated if the amount of deficit stamp duty is varied on appeal or revision or by any order of a competent Court or Authority.
(4-B) The amount of interest payable under sub-section (4-A) shall be added to the amount due and be also deemed for all purposes to be part of the amount required to be paid.
(4-C) Where realisation of the deficit stamp duty remained stayed by any order of any Court or Authority and such order of stay is subsequently vacated, the interest referred to in sub-section (4-A) shall be payable also for any period during which such order of stay remained in operation.
(4-D) Any amount paid or deposited by or recovered from, or refundable to, a person under the provision of this Act, shall first be adjusted towards the deficit stamp duty or penalty outstanding against him and the excess, if any, shall then be adjusted towards the interest, if any, due from him.] (5) The instrument produced before the Collector under sub-section (2) or under sub-section (3) shall be deemed to have come before him in the performance of his functions.
(6) In case the instrument is not produced within the period specified by the Collector, he may require payment of deficit stamp duty, if any, together with penalty on the copy of the instrument in accordance with the procedure laid down in sub-sections (2) and (4).
75. Power to make rules generally to carry out Act.-The State Government may make rules to carry out generally the purposes of this Act, and may by such rules, prescribe the fines, which shall in no case exceed five hundred rupees, to be incurred on breach thereof."
A bare perusal of the Section 27 of the Indian Stamp Act indicates that It is incumbent upon the parties to an instrument to fully and truly set forth therein the consideration (if any) and all other facts and circumstances affecting the chargeability of such instrument with duty, or the amount of duty with which it is chargeable failing which a panel provision has been provided for as is prescribed under section 64 of the Act.
Section 47-A of the Indian Stamp Act, as applicable in the State of U.P., provides for dealing with the instrument, conveyance etc. if the said instrument is undervalued and same empowers the District Magistrate/Collector to recover the deficient amount with penalty. Section 75 of Indian Stamp Act empowers the State Government for framing of Rules for carrying out the purpose of the Act.
The U.P. Stamp (Valuation of Property) Rules, 1997 have been framed in exercise of power conferred under Sections 27, 47-A and 75 of the Indian Stamp Act, 1899 and therein Rule 4 deals with the fixation of minimum rate for valuation of land, construction value of non-commercial building and minimum rate of rent of commercial building. For ready reference, Rule 4 of 1997 Rules is quoted below;
"4- Fixation of minimum rate for valuation of land, construction value of non-commercial building and minimum rate of rent of commercial building.- (1) The Collector of the district shall yearly, as for as possible, in the month of August, fix the minimum value per hectare/per square metre of agricultural/non-agricultural land, the minimum value per square metre of construction of non-commercial building and the minimum monthly rent per square metre of commercial building, situated in different parts, taking into consideration the following facts;-
(a) in case of agricultural land-
(i) classification of soil;
(ii) availability of irrigation facility,
(iii) proximity to road, market, bus station, railway station factories, educational institutions, hospitals and government offices;
(iv) location with reference to its situation in urban area, semi-urban or countryside; and
(v) potentiality as distance from developed area.
(b) in case of non-commercial building-
(i) location of building; and
(ii) kind of construction and value of building.
(c) in case of commercial building-
(i) nature of economic activity in the locality; and
(ii) prevailing rent in the locality, and kind of commercial building.
(2) The Collector of the district may, suo motu or on an application made to him in this behalf, on being satisfied about the incorrectness of the minimum value of land or of the construction of non-commercial building or the minimum rent of a commercial building fixed by him under sub-rule (1), for reasons recorded in writing, revise the same within a period of one year from the dated of fixation of minimum value or rent as the case may be.
Explanation.- (1) The revision in rates of immoveable property does not only mean to increase the rates but to reduce the rates fixed more than the rates prevailing in such locality.
(2) The kind of commercial building means economic activities in it.
(3) The direction issued by Government/Commissioner of Stamps shall have the same effect as if it were issued under these rules.] (3) The Collector of the district shall after fixing the minimum value per acre/per square mete of land, and of the construction of non-commercial building and the minimum rent per square metre of commercial building under sub-rule (1), send a statement in three parts to the Registrar. The first part of such statement shall contain the division of each sub district of the district under his jurisdiction into urban area, semi-urban area and the countryside, the second part shall specify the minimum value of land situated in different parts of the sub-district and the third part shall contain, in the case of the non-commercial building, the minimum value of construction and in the case of commercial building the minimum rent fixed under sub-rule (1).
(4) The Registrar shall supply copies of statement mentioned in sub-rule (3) to the Sub-Registrars under his control and shall also forward a copy of the same to the Inspector General of Registration, Uttar Pradesh.
(5) Every Registering Officer shall cause a copy of the above statement to be affixed on the notice board outside the registration office."
Rule 5, on the other hand, deals with calculation of minimum value of land, grove, garden and building.
"5. Calculation of minimum value of land, grove, garden and building.- For the purposes of payment of stamp duty, the minimum value of immovable property forming the subject of an instrument shall be deemed to be such as may be arrived at as follows:
(a) In case of land Minimum value Whether agricultural or non agricultural Area of land multiplied by minimum value fixed by Collector of the district under rule 4
(b) In case of grove or garden
(i) if assessed to revenue Minimum value of the land as worked out in the manner laid down in Clause (a) plus the value of the trees standing thereon worked out on the basis of the average price of the trees of the same nature, size and age prevailing in the locality on the date of the instrument;
(ii) if not assessed to revenue or is exempted from it and is rented.
Twenty times the annual rent plus the premium, if any, plus the value of trees standing thereon determined in accordance with sub-clause (i);
(iii) if not assessed to revenue or is exempted from it and profit has arisen during three years immediately preceding the date of the instrument Twenty times the average annual profit plus the value of the trees standing thereon determined in accordance with sub-clause (i);
(iv) if not assessed to revenue or is exempted from it and no profit has arisen during three years immediately preceding the date of the instrument Twenty times the assumed annual profit plus the value of the trees standing thereon determined in accordance with sub-clause (i).
(c) In case of buildings-
(i) Non-commercial building Minimum value of land whether covered by the construction or not, which is subject matter of the instrument as worked out under clause (a) plus the value of construction of building arrived at by multiplying the constructed area of each floor of the building by the minimum value fixed by the Collector of the district under rule 4.
(ii)Commercial building Three hundred times the minimum monthly rent of the building, which is the subject matter of instrument, calculated by multiplying the constructed area of each floor of the building with the minimum rent fixed by the Collector of the district under Rule 4.
U.P. Stamp (Valuation of Property) Rules, 1997 has been amended from time to time and the last amendment has been made by means of Uttar Pradesh Stamp (Valuation of Property) (Third Amendment) Rules, 2015, wherein following amendment had been made in Rule 4 and 5 and same are as follows;
"Amendment of Rule 4.--In the said rules in Rule 4 for sub-rules (1), (2) and (3) the following sub-rules shall be substituted, namely--
"4. (1) The Collector of the district shall yearly, as far as possible in the month of August, fix the minimum value per hectare/per square of agriculture/non-agriculture land, the minimum value per square metre of construction of non commercial building and single unit shops and commercial establishments and the minimum value of carpet area per square metre for shops and commercial establishment situated in building, other than single unit commercial buildings, situated in different parts of the district taking into consideration the following facts:
(a) in case of agriculture land--
(I) Classification of soil;
(ii) availability of irrigation facility;
(iii) proximity to road, market, bus station, railway station, factories, educational institutions, hospitals and Government offices; and
(iv) location with reference to its situation in urban area, semi-urban area or country-side;
(v)potentiality of distance from developed area;
(b) In case of non-commercial building--
(i)location of building;
(ii)kind of constructions and value of building;
(c) In case of commercial building:
(i) location of building;
(ii) nature of economic activity in the locality;
(iii) nature of commercial building; and
(iv) floor wise location of property.
(2) - The Collector of the district may,suo motu or on an application made to him in this behalf, on being satisfied about the incorrectness of the minimum value of land or per square metre rate of construction of non-commercial or single unit shops and commercial establishments and the minimum value of carpet area per square metre in case of shops and commercial establishments situated in buildings other than single unit commercial buildings fixed by him under sub-rule (I), for reasons to be recorded in writing, revise the same within a period of one year from the date of fixation of minimum value, as the case may be.
Explanation:- (1) The revision in the rates of immoveable property does not only mean to increase the rates but also to reduce the rates if fixed more than the rates prevailing in such locality.
(2) The nature of commercial building means economic activities in it.
(3)The direction issued by Government/Commissioner of stamps shall have the same effect as if it were issued under these rules.
(4) Single unit shop and commercial establishment shall denote such commercial building where land and total construction situated upon such land is being transferred by a single transaction.
(5) Shops and commercial establishments situated in commercial buildings other than single unit commercial building shall denote such commercial property where a part of construction on a land is being transferred along with proportionate land and common area.
(3)- The Collector of the district shall after fixing the minimum value per hectare/per square metre of agriculture/ non agriculture land and the minimum rate of construction per square metre of non commercial buildings and single unit shops and commercial establishments and per square metre rate of carpet area of shops and commercial establishments situated in buildings other than single unit commercial building under sub-rule(I) send a statement in three parts to the Registrar, the first part of such statement shall contain the division of district under his jurisdiction, into urban area, semi urban area and the country side, second part shall specify the minimum value of land situated in different parts of the sub-district and the third part shall contain, in the case of non commercial building and single unit shops and commercial establishments situated in commercial buildings, the minimum value of construction and in case of shop and commercial establishment situated in the building other than single unit commercial building the minimum rate of carpet area per square metre."
4. Amendment of rule 5.--In the said rules, in rule 5 for sub-clause(ii) of clause (c) set out in Column-I below the sub-clause as set out in Column-II shall be substituted, namely,--
"5- Commercial Building:- (i) In case of single unit shop and commercial establishment, value shall be determined by adding minimum value of land whether covered by construction or not, and the value of the constructed area of each floor of the building calculated on the basis of rate fixed by the Collector under rule-4.
(ii) In case of shop and commercial establishments situated in buildings, other than single unit commercial building, value shall be determined by multiplying the minimum rate of carpet area fixed by the Collector under rule-4 with the actual carpet area of the shop and commercial establishment."
A bare perusal of both the rules would go to show that as far as the competence of State Government to frame such rules is concerned, same has not at all been disputed or questioned before us and to term the said rules on its face value to be arbitrary, as there are no guidelines, cannot be accepted by us, inasmuch as, sufficient guidelines are provided in the rules itself as for example in the case of agricultural land at the point of time when fixation of minimum rate is to be done, classification of soil, availability of irrigation facility, proximity to road, market, bus station, railway station, factories, educational institutions, hospitals and government offices alongwith location with reference to its situation in urban area, semi-urban or countryside, potentiality as distance from developed area are relevant factors. Similarly, in the case of non-commercial building, location of building, kind of construction and value of building and in case of commercial building, nature of economic activity in the locality and prevailing rent in the locality, and kind of commercial building are relevant. Not only this, the Collector under Sub-rule 2 of Rule 4 of 1997 Rules, conferred with the authority either suo motu or on an application made to him in that behalf to correct in case incorrect fixation has been made of the minimum value of the land or of the construction of non-commercial building or the minimum rent of a commercial building fixed by him and he has also been conferred with the authority to revise the same within a period of one year from the date of fixation of minimum value or rent as the case may be.
All these provisions would clearly go to show that the authority, that has been conferred upon the District Magistrate/Collector is not to be exercised at his whims or fancies, rather there are relevant considerations that has to be kept in mind by the Collector at the point of time when he proceeds to make fixation of minimum rate for valuation of land, construction value of non-commercial building and minimum rate of rent of commercial building, in view of this, the challenge, that has been made by the petitioner, sans substance and is, accordingly, turned down.
Coupled with this, we also make it clear that once the document in question is under valued, then under Section 47-A, reference is to be made. Under Rule 7 a full fledged mechanism has been provided for, as to how on receipt of reference, the matter is to be dealt with. Rule 7 is as follows;
"Rule 7. Procedure on receipt of a reference or when suo motu action is proposed under Section 47-A.--(1) On receipt of a reference or where action is proposed to be taken suo motu under Section 47-A, the Collector shall issue notice to parties to the instrument to show cause within thirty days of the receipt of such notice as to why the market value of the property set forth in the instrument and the duty payable thereon be not determined by him.
(2) The Collector may admit oral or documentary evidence, if any, produced by the parties to the instrument and call for and examine the original instrument to satisfy himself as to the correctness of the market value of the subject-matter of the instrument and for determining the duty payable thereon.
(3) The Collector may:
(a) call for any information or record from any public office, officer or authority under the government or local authority;
(b) examine and record the statement of any public officer or authority under the Government or local authority;
(c) inspect the property after due notice to the parties to the instrument.
(4) After considering the representation of the parties, if any, and examining the records and other evidence, the Collector shall determine the market value of the subject matter of the instrument and the duty payable thereon.
(5) If, as a result of such inquiry, the market value is found to be fully and truly set forth and the instrument duly stamped according to such value, it shall be returned to the person who made the reference with a certificate to that effect. A copy of such certificate shall also be sent to the Registering officer concerned.
(6) If as a result of such inquiry, the market value is found to be undervalued and not duly stamped, necessary action shall be taken in respect of it according to relevant provisions of the Act. "
The Collector is to issue notice to parties to the instrument to show cause within 30 days of the receipt of such notice as to why the market value of property set-forth in the instrument and the duty payable threon be not determined by him. The Collector is also entitled to admit oral or documentary evidence, if any, produced by the parties to the instrument and call for and examine the original instrument to satisfy himself as to the correctness of the market value of the subject matter of the instrument and for determining the duty payable thereon. The Collector is entitled to call for any information or record from any public office, officer or authority under the Government or a local authority and examine and record the statement of any public officer or authority under the Government or the local authority and also inspect the property after due notice to parties to the instrument. Even after considering the representation of the parties, if any, and examining the records and other evidence, the Collector shall determine the market value of the subject-matter of the instrument and the duty payable thereon. If, as a result of such enquiry, the market value is found to be fully and truly set forth and the instrument duly stamped according to such value, it has to be returned to the person, who made the reference with a certificate to that effect. A copy of such certificate shall also be sent to the Registering Officer concerned. If, as a result of inquiry, the instrument is found to be under-valued and not duly stamped, necessary action has to be taken in respect of it according to relevant provisions of the Act.
Thus, as far as stamp duty is concerned, it has a direct co-relation with the market value of the property in question and the remedial forum before the Collector is also there. Provisions of Section 47-A, as already mentioned above, has been introduced in order to curb the evasion of stamp duty and to enable the Collector to determine what is the correct market value of the property in a situation when instrument was not reflecting the correct market value, in view of this also, once a full fledged mechanism has been provided for under Section 47-A of the Indian Stamp Act read with Rule 7 of 1997 Rules, even on this ground, the challenge made sans merit.
The provisions, quoted above, have been subject matter of consideration before this Court and the law on the subject has been duly formulated in several decisions of this Court. Said decisions have been considered in extenso in the Full Bench judgment of this Court in the case of Smt. Pushpa Sareen vs. State of U.P. in Reference Against Misc. Acts No. 1 of 1993 decided on 12.2.2015 wherein Chief Controlling Authority had made reference. The relevant extract of the said judgment is quoted below;
"In Kaka Singh vs. The Additional Collector and District Magistrate (Finance and Revenue) and another, a Division Bench of this Court noted that Section 47-A filled in a lacuna because prior to the insertion of the provision, there was no enabling provision under the Act empowering the revenue authority to make an enquiry into the value of the property conveyed for determining the duty payable thereon. Section 27 of the Act laid down that the consideration (if any) and all other facts and circumstances affecting the chargeability of any instrument with duty or the amount of the duty with which it is chargeable, shall be truly and fully set forth therein. However, prior to the insertion of Section 27, if the instrument did not set forth the true market value of the property, the revenue was not empowered to adjudicate upon the correct market value. This lacuna which was noticed in a judgment of the Supreme Court in Himalaya House Co. Ltd., Bombay vs. The Chief Controlling Revenue Authority was remedied by the insertion of Section 47-A. After the insertion of Section 47-A, this Court had taken the consistent position that the power of the Collector was not only confined to the minimum value which was prescribed in the rules framed under the Act. Rule 341 of Chapter XV of the Stamp Rules provided that for the purposes of the payment of stamp duty, the minimum market value of immovable property forming the subject inter alia of a conveyance referred to in Section 47-A (1) would not be less than what was arrived at on the basis of the provisions of the rules. But it was well settled that the power of the Collector was not confined to the minimum as prescribed in Rule 341. In other words, the value computed under Rule 341 was not conclusive of what should be the correct market value when the Collector had to make a determination in pursuance of an inquiry under sub-section (3) of Section 47-A. Under sub-section (1) of Section 47-A, the registering officer could make a reference to the Collector, if he found that the market value as reflected in the instrument was less than even the minimum prescribed in the Rules. However, the minimum which was prescribed in the rules was at best a guiding factor for the Collector and was not conclusive of his power to determine the market value. For that matter, the value under Rule 341 was not binding either on the person who produced the instrument for registration or on the State Government.
Subsequently, the provisions of the Stamp Rules in regard to valuation were replaced by the Uttar Pradesh Stamp (Valuation of Property) Rules, 1997 which have been made in exercise of the powers conferred by Sections 27, 47A and 75 of the Stamp Act. However, it is not necessary for the Court to express any view on the scheme or provisions of those rules since the period of dispute in the present reference is prior to the enforcement of those rules.
We may also note at this stage that the decision of the Division Bench in Kaka Singh (supra) was followed by another Division Bench of this Court in Agra City Real Estate Development Organisation vs. State of U.P. and others, where it was held as follows:
"Section 47A (1) does not say that the valuation of the property for the purpose of stamp duty has to be the minimum value determined under the Rules. All it says is that if the valuation set forth in the instrument is less than the minimum value determined in accordance with the rules, then a reference has to be made to the Collector. Thus, the minimum value fixed under the rules is only for the purpose of getting a reference made to the Collector. When the reference comes before the Collector, he has to make an enquiry and determine the correct market value of the property. After such enquiry, the Collector can even hold that the correct market value of the property is less than the minimum fixed under the Rules."
In this view of the matter, we answer question 4 by holding that the power of Collector to determine the market value either on a reference under sub-section (1) or (2) of Section 47-A or acting suo motu under sub-section (4) was to determine the correct market value of the property.
Now insofar as the second question is concerned, the issue posed for consideration before the Court is whether the Collector has the power to fix the valuation of a plot on the assumption that it is likely to be used for commercial purposes and whether the presumed future prospective use of the land can be a criterion for valuation by the Collector. The Collector, while exercising his jurisdiction under Section 47-A, is required to determine the market value of the property on the date of the instrument. It is a well settled principle of law that stamp duty is a levy which is imposed not on the transaction but on the instrument.
The attention of the Court has been drawn to certain judgments of the learned Single Judges of this Court which had taken the view that the market value of the land could not be determined with reference to the use of the land to which the buyer intends to put it in future.
Section 17 of the Stamp Act provides that all instruments chargeable to duty and executed by any person in India shall be stamped before or at the time of execution.
In certain judgments of the learned Single Judges of this Court, a view had been taken that the authorities are required to determine the value of the land on the date on which the sale was made and cannot consider the potential value of the land to which it could be put to use in future. (Smt. Kusum Lata Jaiswal vs. State of U.P. and others). Similarly in Dinesh Tiwari vs. Commissioner, Gorakhpur and others, it was held that the Collector had no power to assess the market value of the property on the basis of a future value which the property may acquire.
The power and jurisdiction of the Collector, as contained in Section 47-A, is to determine the actual market value of the property. The Collector in making that determination is not bound either by the value as described in the instrument or for that matter, the value as discernible on the basis of the rules.
In Ramesh Chand Bansal and others vs. District Magistrate/Collector, Ghaziabad and others, the Supreme Court held as follows:
"The object of the Indian Stamp Act is to collect proper stamp duty on an instrument or conveyance on which such duty is payable. This is to protect the State revenue. It is matter for common knowledge in order to escape such duty by unfair practice, many a time under valuation of a property or lower consideration is mentioned in a sale deed. The imposition of stamp duty on sale deeds are on the actual market value of such property and not the value described in the instrument. Thus, an obligation is cast on authority to properly ascertain its true value for which he is not bound by the apparent tenor of the instrument. He has to truly decide the real nature of the transaction and value of such property. For this, Act empowers an authority to charge stamp duty on the instrument presented before it for registration. The market value of a property may vary from village to village; from location to location and even may differ from the sizes of area and other relevant factors. This apart there has to be some material before such authority as to what is likely value of such property in that area. In its absence it would be very difficult for such Registering Authority to assess the valuation of such instrument. It is to give such support to the Registering Authority the Rule 340-A is introduced. Under this Collector has to satisfy himself based on various factors mentioned therein before recording the circle rate, which would at best be the prima facie rate of that area concerned. This is merely a guideline which helps the Registering Authority to assess the true valuation of a transaction in an instrument. This gives him material to test prima facie whether description of valuation in an instrument is proper or not.... Reading Section 47-A with the aforesaid Rule 340-A it is clear that the circle rate fixed by the Collector is not final but is only a prima facie determination of rate of an area concerned only to give guidance to the Registering Authority to test prima facie whether the instrument has properly described the value of the property. The circle rate under this Rule is neither final for the authority nor to one subjected to pay the stamp duty. So far sub-sections (1) and (2) it is very limited in its application as it only directs the Registering Authority to refer to the Collector for determination in case property is under valued in such instrument. The circle rate does not take away the right of such person to show that the property in question is correctly valued as he gets an opportunity in case of under valuation to prove it before the Collector after reference is made. This also marks the dividing line for the exercise of power between the Registering Authority and the Collector. In case the valuation in the instrument is same as recorded in the circle rate or is truly described it could be registered by Registering Authority but in case it is under valued in terms of sub-section (1) or sub-section (2), it has to be referred and decided by the Collector. Thus, the circle rate, as aforesaid, is merely a guideline and is also indicative of division of exercise of power between the Registering Authority and the Collector."
The true test for determination by the Collector is the market value of the property on the date of the instrument because, under the provisions of the Act, every instrument is required to be stamped before or at the time of execution. In making that determination, the Collector has to be mindful of the fact that the market value of the property may vary from location to location and is dependent upon a large number of circumstances having a bearing on the comparative advantages or disadvantages of the land as well as the use to which the land can be put on the date of the execution of the instrument.
Undoubtedly, the Collector is not permitted to launch upon a speculative inquiry about the prospective use to which a land may be put to use at an uncertain future date. The market value of the property has to be determined with reference to the use to which the land is capable reasonably of being put to immediately or in the proximate future. The possibility of the land becoming available in the immediate or near future for better use and enjoyment reflects upon the potentiality of the land. This potential has to be assessed with reference to the date of the execution of the instrument. In other words, the power of the Collector cannot be unduly circumscribed by ruling out the potential to which the land can be advantageously deployed at the time of the execution of the instrument or a period reasonably proximate thereto. Again the use to which land in the area had been put is a material consideration. If the land surrounding the property in question has been put to commercial use, it would be improper to hold that this is a circumstance which should not weigh with the Collector as a factor which influences the market value of the land.
The fact that the land was put to a particular use, say for instance a commercial purpose at a later point in time, may not be a relevant criterion for deciding the value for the purpose of stamp duty, as held by the Supreme Court in State of U.P. and others vs. Ambrish Tandon and another. This is because the nature of the user is relateable to the date of purchase which is relevant for the purpose of computing the stamp duty. Where, however, the potential of the land can be assessed on the date of the execution of the instrument itself, that is clearly a circumstance which is relevant and germane to the determination of the true market value. At the same time, the exercise before the Collector has to be based on adequate material and cannot be a matter of hypothesis or surmise. The Collector must have material on the record to the effect that there has been a change of use or other contemporaneous sale deeds in respect of the adjacent areas that would have a bearing on the market value of the property which is under consideration. The Collector, therefore, would be within jurisdiction in referring to exemplars or comparable sale instances which have a bearing on the true market value of the property which is required to be assessed. If the sale instances are comparable, they would also reflect the potentiality of the land which would be taken into consideration in a price agreed upon between a vendor and a purchaser.
In the circumstances, we answer the second question as referred in the aforesaid terms."
This Court in the case of Ratan Shankar Dwivedi Vs. State of U.P., Writ Petition No. 58020 of 2007, decided on 2.3.2012, explained the object of Stamp Act as follows;
"The Stamp Act is a fiscal measure enacted with an object to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of initial defect in the instrument. The sole object of Stamp Act under its various provisions is to require the parties concerned to set forth correct market value of the property at which the transaction has taken place so that appropriate duty in accordance with the Act is paid by them to avoid large scale evasion of stamp duty. It also mandates that while setting forth the correct market value of the property in dispute the competent authority must not apply their mind in a fact fashion and in a haphazard way."
In the said case, Ratan Shankar Dwivedi (supra), the Court explained the meaning and purport of market value under the Act as follows;
"The term "market value" has not been defined under the Act. However there are some precedents laying down certain guidelines as to how and in what manner a market value would be determined. The consensus opinion is that the market value of any property is the price which the property would fetch or would have fetched if sold in the open market, if sold by a willing seller, unaffected by the special need of a particular purchaser. It is interesting to note that the Act provides first for determination of minimum value of the property and further says that if the market value of the property set forth in the instrument is less than the minimum value determined under the Act, in such case before registering the instrument the registering authority shall refer the instrument to Collector for determination of market value of the property and the proper duty payable thereon and when the Collector determines market value of the property thereafter the parties shall proceed accordingly. Therefore, a market value of the property in all cases cannot be said to be higher than the alleged minimum value determined under the rule by the concerned authority, inasmuch as, it is only a kind of guideline provided to the authorities for the purpose of considering as to whether the proper stamp duty is being paid by setting forth true market value of the property in question in the instrument. The various provisions with respect to minimum value etc. are only in aid and assistance of the authorities to find out the true amount of consideration on which the parties have entered into transaction so that the correct duty is collected therefrom."
Apex Court in the case of Ramesh Chandra Bansal Vs. District Magistrate, Ghaziabad, 1995 (5) SCC 62, has taken the view that circle rate fixed by Collector is not final and same is prima facie determination of rate for area concerned. The circle rate does not take away the right of citizen to show that actual valuation is less than circle rate.
Apex Court in the case of R. Sai Bharathi Vs. J. Jayalalitha and others, 2004 (2) SCC, held as follows;
"22. ..............The authorities cannot regard the guideline valuation as the last word on the subject of market value.......
24. ..........It is clear, therefore, that guideline value is not sacrosanct as urged on behalf of the appellants, but only a factor to be taken note of if at all available in respect of an area in which the property transferred lies........."
Apex Court in the case of State of Haryana and others Vs. Manoj Kumar, Civil Appeal No. 2226 of 2010, decided on 9.3.2010, while allowing the appeal preferred on behalf of State of Haryana mentioned, while considering akin provisions, that in order to ensure that there is no evasion of stamp duty, circle rates are fixed from time to time and the notification is issued to the said effect. The issuance of said notification has become imperative to arrest the tendency of evading the payment of actual stamp duty. It is matter of common knowledge that usually the circle rate or collector rate is lower than prevalent actual market rate but to ensure registration of sale deed at least at the circle rates such notifications are issued.
Consequently, in the facts of the case, once the authority is there with the guiding principle, then there is no occasion or reason before us to intervene in the matter as no material whatsoever has been supplied to us which would show and justify that the way and manner in which the District Magistrate has proceeded to fix the circle rate, same is in violation of Rules or on irrelevant considerations fixation has been done.
Writ petition is dismissed, accordingly.