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Chief Controlling Revenue Authority v. Costal Gujarat Power Ltd. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 6054 of 2015)Decided 11 Aug 2015
Civil Appeal No. 6054 of 2015
Justice M.Y. Eqbal · Justice Arun Mishra

Background

Coastal Gujarat Power Ltd. borrowed money from a consortium of 13 lenders for a power project and, instead of executing separate mortgage deeds with each lender, executed a single mortgage deed in favour of the State Bank of India acting as "security trustee" for all the lenders, paying stamp duty on only one instrument. The Revenue authorities held this single deed actually represented 13 distinct mortgage transactions and demanded over Rs. 50 lakh in additional (deficit) stamp duty; the Gujarat High Court's Full Bench disagreed and ruled in the company's favour, prompting the Revenue's appeal.

Decision Breakdown

The Supreme Court held that the High Court misapplied Sections 5 and 6 of the Gujarat Stamp Act, which treat "distinct matters" differently from matters of the same "description", relying on the Constitution Bench ruling in The Member, Board of Revenue vs. Arthur Paul Benthall to explain that transactions can be of the same category yet still be legally distinct matters requiring separate stamp duty. Because the company had in substance obtained distinct financial assistance from 13 separate lenders and used a security-trustee structure to route them through one document, the Court found the arrangement did involve distinct matters attracting Section 5. The Court allowed the appeal, set aside the High Court's ruling, and held the company liable to pay the deficit stamp duty along with interest.

Lesson Learnt

Structuring a transaction through an intermediary or trustee to route multiple distinct financial dealings into a single document does not avoid the stamp duty that would otherwise be payable on each separate transaction: tax and stamp authorities can look through the form of a document to its real substance.

Official source (sci.gov.in)View Judgment (PDF)

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