ELP Litigation Update – High Court of Bombay: Interim stay on levy of Stamp Duty on Bills of Entry

High Court of Bombay: Interim stay on levy of Stamp Duty on Bills of Entry

Viraj Profiles v. The State of Maharashtra & Ors.^[1]

The High Court of Bombay in Viraj Profiles v. The State of Maharashtra & Ors.^[2] (Viraj Profiles) and other related tagged matters has relied upon a judgement of the High Court of Gujarat wherein it laid down that Stamp Duty is not leviable on a Bill of Entry (BOE).  By an interim order, it has stayed the collection of Stamp Duty on BOE’s for clearance of goods from Customs Notified Areas under Article 29 of the Maharashtra Stamp Act,1958 (Maharashtra Stamp Act).

Circular introducing stamp duty on goods imported through ports

• The Bombay Stamp Act, 1958 (Bombay Stamp Act), as applicable to the State of Gujarat, contained a provision in Article 24 of Schedule I, whereby Stamp Duty was leviable on Delivery Orders in respect of goods.
• On 29 March 2006, a Circular was released by the Inspector General of Registration and Superintendent of Stamps of Gujarat (Circular dated March 29, 2006) levying Stamp Duty at the rate of INR 1/- per INR 1000/- or part thereof on BOE for clearance of  goods imported through ports, on the basis of Article 24 of the Bombay Stamp Act.

High Court of Gujarat struck down the validity of the Circular

• Legality and correctness of the Circular dated March 29, 2006 and levy of Stamp Duty on BOE was challenged before the High Court of Gujarat in Essar Steel Limited & Anr. v. Superintendent of Stamps & Ors.^[3] (Essar Steel) and other connected matters.
• The Single Judge of High Court of Gujarat by a common judgement dated February 24, 2010 (Judgement dated 24 February 2010) held that Stamp Duty was not leviable on BOE under Article 24 of the Stamp Act.

Division Bench of the Gujarat High Court upholds the judgement

• The State of Gujarat challenged the judgement dated February 24, 2010 in State of Gujarat v. Reliance Industries[4] (Reliance Industries) interlia  on grounds that :-

– Stamp Duty is payable on BOE  as a BOE is a ‘Delivery Order’ in respect of goods; and

– BOE constitutes to be ‘an instrument’ or a document that creates or is supposed to create a right or liability on entitlement of delivery of goods.

• Confirming the judgement dated February 24, 2010, the Division Bench interalia held that :-

– In Union of India v. Chowgule & Co. Pvt. Ltd.[5], only the importer named in BOE is entitled to seek clearance of goods from customs and is not permitted to endorse/assign the BOE. The very nature of BOE does not satisfy pre-requisites of Article 24 of Schedule 1 of the Bombay Stamp Act as it refers to an instrument which is negotiable in nature i.e. capable of endorsement / assignment / transfer;

– In Escorts Limited v. Union of India[6], it was laid down that BOE is a document filed by the importer giving particulars of the goods which is signed by the assessing officer, thereby signifying his approval. This, in itself, is an order of assessment.
– It was further laid down that since BOE signifies itself as an order of assessment, that is required to be produced before Custom Authorities for clearance of goods, it is distinct and different from delivery of goods. Hence, it does not fall under the purview of Article 24 of Schedule 1 of the Bombay Stamp Act.

Challenge to Reliance Industries

• Aggrieved by the judgement dated September 8, 2011 in Reliance Industries, the State of Gujarat filed a Special Leave Petition (SLP) before the Supreme Court, which is still pending. Although the SLP is admitted, a prayer for interim relief has been rejected.

Revisiting applicability of Stamp Duty on BOE

• In Viraj Profiles, a Writ Petition (W.P.) was filed under Article 226 of Constitution of India before the High Court of Bombay, challenging the legality and validity of levying Stamp Duty on BOE on import of goods as per the provisions of Article 29 of Schedule 1 of the Maharashtra Stamp Act for clearance of goods from Customs Notified Areas being either Ports, or Inland Container Depots, etc.
• Referring to Reliance Industries, the Petitioner submitted that Stamp Duty is not leviable on BOE.
• The High Court of Bombay relied upon Reliance Industries and in view of the fact that the Supreme Court has not granted any interim order with respect to the judgement of the High Court of Gujarat – by Order dated  December 15, 2021, has granted an interim stay on levy of Stamp Duty on BOE under Article 29 of Schedule 1 of the Maharashtra Stamp Act or under any other Article or Section of the Maharashtra Stamp Act , for clearance of goods from Customs Notified Areas.
• Similar Orders were passed by the High Court of Bombay in Abhishri Packaging Pvt. Ltd. v. The State of Maharashtra[7], Cambro Nilkamal Pvt. Ltd. v. The State of Maharashtra[8], Indexone Infracon Pvt. Ltd. v. The State of Maharashtra[9], Indexone International Pvt. Ltd. v. The State of Maharashtra[10], Jaguar Land Rover India Ltd. v. The State of Maharashtra & Ors.[11], KRYFS Power Components Ltd. v. The State of Maharashtra[12], Nilkamal Storage Systems Pvt. Ltd. v. The State of Maharashtra[13], Nilkamal Ltd. v. The State of Maharashtra[14], Responsive Industries Ltd. v. The State of Maharashtra through Department of Registration and Stamps & Ors.[15], West India Continental Oil Fats Pvt. Ltd. v. The State of Maharashtra[16], Tata Autocomp Systems Ltd. v. The State of Maharashtra & Ors.[17], Tata Motors Passenger Vehicles Ltd. v. The State of Maharashtra[18], and Tata Motors Ltd. v. The State of Maharashtra[19].

The High Court of Bombay relying upon Reliance Industries, has granted an interim stay on the levy of Stamp Duty on BOE. The judgement in Reliance Industries is directly applicable to imports the in State of Maharashtra as Article 29 of the Maharashtra Stamp Act has provisions that are pari-materia to the provisions of the Bombay Stamp Act as applicable to the State of Gujarat (i.e. Article 24).

Reliance Industries interalia has held that, BOE comes into play to ensure clearance of goods from warehouse or dock or port. While BOL is a document of title used by its carriers as it entitles a person named therein or his assignee/endorsee to deliver the mentioned goods.

Noting such distinct differences between the two, it is evident that a BOE entitles only the person named therein to seek clearance of goods from customs and importer and such an importer cannot assign/ endorse.

Article 29 of Schedule 1 of Maharashtra Stamp Act specifically refers to an “instrument entitling any person therein named, or his assigns or the holder thereof, to the delivery”. Such a negotiable instrument is capable of endorsement/assignment/transfer and would enable the assignee of the person named therein or the holder of the instrument to take delivery. Since BOE is non-negotiable in nature, Stamp Duty is not leviable.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Ashishchandra Rao, Partner – Email – AshishchandraRao@elp-in.com
Sharmin Kapadia, Associate – Email – SharminKapadia@elp-in.com

[1] Viraj Profiles v. The State of Maharashtra & Ors. , W.P. (L) No. 12718 of 2021.
[2] Ibid
[3] Essar Steel Limited & Anr. v. Superintendent of Stamps & Ors., Special Civil Application No. 1490 of 2007.
[4] Letters Patent Appeal No. 6 of 2011.
[5] Union of India v. Chowgule & Co. Pvt. Ltd, (1985) 20 ELT 57 ( further affirmed by the Supreme Court in Chowgule & Co. Pvt. Ltd. V. Union of India, 1987 (28) ELT 39 (SC) ).
[6] Escorts Limited v. Union of India , 1998 (97) ELT 211 (SC).
[7] Abhishri Packaging Pvt. Ltd. v. The State of Maharashtra W.P. (L) No. 11697 of 2022.
[8] Cambro Nilkamal Pvt. Ltd. v. The State of Maharashtra, W.P. No. (L) 9387 of 2022.
[9] Indexone Infracon Pvt. Ltd. v. The State of Maharashtra, W.P. No. (L) 487 of 2022.
[10] Indexone International Pvt. Ltd. v. The State of Maharashtra, W.P. No. (L) No. 2078 of 2022.
[11] Jaguar Land Rover India Ltd. v. The State of Maharashtra & Ors., W.P. No. (L) No. 11453 of 2022.
[12] KRYFS Power Components Ltd. v. The State of Maharashtra, W.P. No. (L) No. 2863 of 2022.
[13] Nilkamal Storage Systems Pvt. Ltd. v. The State of Maharashtra, W.P. No. (L) No. 9393 of 2022.
[14] Nilkamal Ltd. v. The State of Maharashtra through Department of Registration and Stamps & Ors., W.P. No. (L) No. 9390 of 2022.
[15] Responsive Industries Ltd. v. The State of Maharashtra through Department of Registration and Stamps & Ors., W.P. No. (L) No. 3061 of 2022.
[16] West India Continental Oil Fats Pvt. Ltd. v. The State of Maharashtra, W.P. No. (L) No. 504 of 2022.
[17] Tata Autocomp Systems Ltd. v. The State of Maharashtra & Ors. , W.P. No. (L) No. 478 of 2022.
[18] Tata Motors Passenger Vehicles Ltd. v. The State of Maharashtra & Ors, W.P. No. (L) No. 10239 of 2022.
[19] Tata Motors Ltd. v. The State of Maharashtra, W.P. No. (L) No. 10265 of 2022.