A) ABSTRACT / HEADNOTE

The Supreme Court of India, in the landmark case of Chief Controlling Revenue Authority and Superintendent of Stamps v. Maharashtra Sugar Mills Ltd., adjudicated on the obligation of the Chief Controlling Revenue Authority under Section 57 of the Indian Stamp Act, 1899, to make a reference to the High Court for legal interpretation. The case highlighted the conflict between executive discretion and statutory duty in the sphere of revenue law, particularly in the context of the classification of an instrument for stamp duty purposes.

The respondent, Maharashtra Sugar Mills Ltd., challenged the excessive stamp duty and penalty levied upon an instrument alleged by the revenue authority to be a “mortgage with possession.” The Court critically examined the nature of powers under Section 57, holding that the discretionary power of the Revenue Authority is coupled with a duty, especially when a party adversely affected requests a reference and a substantial question of law is involved. It ruled that the High Court is empowered to direct the Revenue Authority to make such a reference. The Court also clarified that such judicial directions are not barred under Section 226(1) of the Government of India Act, 1935, as they do not amount to original jurisdiction over revenue matters but rather enforcement of a statutory duty.

The ruling adopted and extended the principle in Alcock Ashdown & Co. Ltd. v. Chief Revenue Authority, 50 I.A. 227 and Julius v. Bishop of Oxford, 5 A.C. 214, establishing jurisprudence that balances administrative discretion with accountability in revenue adjudication.

Keywords: Indian Stamp Act, revenue authority, judicial review, section 57 reference, statutory duty, Government of India Act 1935, mortgage with possession, original jurisdiction, coercive recovery.

B) CASE DETAILS

i) Judgement Cause Title
Chief Controlling Revenue Authority and Superintendent of Stamps v. Maharashtra Sugar Mills Ltd.

ii) Case Number
Civil Appeal No. XII of 1950

iii) Judgement Date
May 27, 1950

iv) Court
Supreme Court of India

v) Quorum
Harilal Kania C.J., Saiyid Fazl Ali, Patanjali Sastri, Mehr Chand Mahajan, and B.K. Mukherjea JJ.

vi) Author
Kania C.J.

vii) Citation
AIR 1950 SC 218; (1950) SCR 536

viii) Legal Provisions Involved

• Section 57 and Section 59(2) of the Indian Stamp Act, 1899

• Section 226(1) of the Government of India Act, 1935

• Section 45 of the Specific Relief Act

• Article 40(a) of the Stamp Act Schedule

ix) Judgments Overruled by the Case
None

x) Case is Related to which Law Subjects
Revenue Law, Taxation Law, Administrative Law, Constitutional Law, Stamp Duty Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The Supreme Court in this case addressed a crucial procedural and constitutional question in revenue jurisprudence. The case emerged against the backdrop of the State exercising coercive revenue collection measures under the Indian Stamp Act against the Maharashtra Sugar Mills Ltd., which contested the categorization and stamp duty calculation made by the Assistant Superintendent of Stamps. The dispute revolved around whether a particular instrument constituted a mortgage with possession or a hypothecation, which significantly influenced the payable duty.

The Revenue Authority’s refusal to refer the matter to the High Court under Section 57 prompted the company to seek judicial redress. The High Court had directed the Authority to state a case, and the Revenue Department appealed to the Supreme Court challenging the jurisdiction of the High Court and the mandatory nature of Section 57. The case thus presented a constitutional conundrum regarding the judicial enforcement of statutory duties amidst revenue proceedings.

The judgment draws significant parallels from Alcock Ashdown and Julius v. Bishop of Oxford, forming a jurisprudential bridge between judicial oversight and revenue administration. It also discusses whether such matters fall within the restricted domain of ‘original jurisdiction’ concerning revenue as under Section 226 of the Government of India Act, 1935.

D) FACTS OF THE CASE

Maharashtra Sugar Mills Ltd. executed a document in March 1945 to secure a loan from the Central Bank of India. They affixed a stamp duty of Rs. 16-8-0, treating the document as a deed of hypothecation without possession of goods. Upon submission to the Sub-Registrar for registration, the document was impounded and sent to the Stamp Office. The Assistant Superintendent of Stamps reclassified the document as a mortgage with possession, chargeable under Article 40(a) with duty amounting to Rs. 56,250, and imposed a penalty of Rs. 5,000.

The company contested this classification and sought rectification of the document through a civil suit, which was granted. Despite this, the Revenue Authority continued to demand the duty and penalty. The company requested the Authority to refer the legal question to the High Court under Section 57, but the request was rejected. The company then approached the Bombay High Court seeking a writ or an order to compel the Revenue Authority to make the reference. The High Court granted the relief. The Revenue Department challenged this before the Supreme Court, asserting that they held discretion in making such references and that courts had no jurisdiction in revenue matters.

E) LEGAL ISSUES RAISED

i) Whether the power of the Chief Controlling Revenue Authority under Section 57 of the Indian Stamp Act is discretionary or mandatory when a party requests a reference to the High Court.

ii) Whether the High Court can compel the Authority to state a case under Section 57.

iii) Whether Section 226(1) of the Government of India Act, 1935 bars the High Court from exercising jurisdiction in directing a revenue officer to make such a reference.

iv) Whether such an intervention by the Court constitutes an act concerning ‘original jurisdiction’ in a matter relating to revenue.

v) Whether the progression of the case to the recovery stage precludes judicial intervention.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that

The power under Section 57 of the Stamp Act is discretionary. The use of the word “may” in the section signifies a permissive, not mandatory, interpretation. Therefore, no duty is imposed upon the Revenue Authority to make a reference even if requested by an affected party. They argued the scheme of the Stamp Act is distinct from the Income Tax Act and cannot be equated with its provisions that create an obligation to refer questions of law.

The counsel also contended that under Section 226(1) of the Government of India Act, 1935, the High Court does not have original jurisdiction over matters concerning the revenue. They stressed that allowing the High Court to intervene would circumvent the intended separation of administrative and judicial functions in revenue matters. Since the case had progressed beyond assessment to recovery, the Court’s interference was not tenable.

The appellant also cited instances where even if a Collector issued an incorrect certificate of duty under Section 32, the Authority had no remedy to revise it. They argued this demonstrated the clear non-mandatory nature of the powers under Section 57.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that

The power under Section 57 is not absolute discretion but is coupled with a statutory duty, especially when the request comes from an affected party involving a substantial question of law. Relying on Alcock Ashdown & Co. Ltd. v. Chief Revenue Authority and the principle laid down in Julius v. Bishop of Oxford, the respondent contended that where a public authority holds a power that affects the rights of individuals, such power becomes an obligation in the presence of a legal duty to act.

They emphasized that the classification of the document was legally complex and involved interpretation of legal principles, which merited a judicial determination. They argued the High Court had jurisdiction to enforce a statutory duty and that doing so did not amount to exercising original jurisdiction over revenue matters.

It was also submitted that the Revenue Authority’s refusal was arbitrary and deprived the respondent of a lawful remedy, justifying the High Court’s intervention. Further, Section 59(2) of the Stamp Act allowed for refunds if the assessment was found excessive, reinforcing that recovery did not preclude judicial review.