A) ABSTRACT / HEADNOTE

The Supreme Court addressed the issue of whether Form No. 5, submitted to the Registrar under Section 97 of the Companies Act, 1956, is an “instrument” under Section 2(l) of the Bombay Stamp Act, 1958, and whether stamp duty is payable on every increase in share capital of a company beyond the prescribed cap. It held that Articles of Association are the relevant instrument for stamp duty. The maximum cap of Rs. 25 lakhs for stamp duty, introduced in 1994, applies cumulatively and not on individual increases. The Court dismissed the State’s appeal, affirming that fiscal statutes must be construed strictly and ambiguities resolved in favor of the taxpayer.

Keywords

Increase in share capital, Stamp duty, Bombay Stamp Act, Articles of Association, Fiscal statute interpretation.

B) CASE DETAILS

• Judgment Cause Title: State of Maharashtra & Anr. v. National Organic Chemical Industries Ltd.
• Case Number: Civil Appeal No. 8821 of 2011
• Judgment Date: 05 April 2024
• Court: Supreme Court of India
• Quorum: Sudhanshu Dhulia & Prasanna B. Varale, JJ.
• Author: Sudhanshu Dhulia, J.
• Citation: [2024] 4 S.C.R. 340; 2024 INSC 270
• Legal Provisions Involved:
  • Bombay Stamp Act, 1958, Sections 2(l), 14A; Article 10 of Schedule-I.
  • Companies Act, 1956, Sections 31(2), 94, 97.
  • Maharashtra Stamp (Amendment) Act, 2015.
• Judgments Overruled: None.
• Case Related to: Corporate Law, Taxation Law.

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The dispute centered around whether the maximum cap on stamp duty under the amended Article 10 of the Bombay Stamp Act, 1958 applied as a one-time cap for the Articles of Association or on every increase in share capital. The respondent sought a refund of Rs. 25 lakhs, arguing it had already paid the maximum duty when it initially increased its share capital. The State of Maharashtra opposed, claiming each increase constituted a separate taxable event.

The Bombay High Court ruled in favor of the respondent, prompting the State to appeal to the Supreme Court.

D) FACTS OF THE CASE

1. The respondent, National Organic Chemical Industries Ltd., was incorporated with a share capital of Rs. 36 crores.
2. In 1992, the share capital was increased to Rs. 600 crores, and stamp duty of Rs. 1.12 crores was paid.
3. In 1994, the State of Maharashtra amended Article 10 of Schedule-I, capping stamp duty for Articles of Association at Rs. 25 lakhs.
4. The respondent further increased its share capital to Rs. 1,200 crores and paid Rs. 25 lakhs as stamp duty in Form No. 5.
5. Later, the respondent sought a refund of Rs. 25 lakhs, claiming it had already paid the capped duty.
6. The Deputy Superintendent of Stamps rejected the claim, leading to a writ petition in the Bombay High Court.

E) LEGAL ISSUES RAISED

1. Is Form No. 5 an “instrument” under Section 2(l) of the Bombay Stamp Act, 1958?
2. Does the maximum cap on stamp duty apply as a cumulative cap for Articles of Association or separately for each share capital increase?

F) PETITIONER/APPELLANT’S ARGUMENTS

1. Form No. 5 as an Instrument: The State argued that Form No. 5, being a notice for increasing share capital, qualifies as an “instrument” creating or recording rights under Section 2(l) of the Stamp Act.
2. Separate Tax Events: It was contended that every increase in share capital is a fresh taxable event, requiring additional stamp duty under Article 10 of Schedule-I.
3. Non-Retrospective Cap: The maximum cap of Rs. 25 lakhs introduced in 1994 could not apply to amounts already paid in 1992.

G) RESPONDENT’S ARGUMENTS

1. Form No. 5 Not an Instrument: It merely provides notice of share capital increase to the Registrar and does not alter the Articles of Association.
2. Articles of Association as the Instrument: The stamp duty cap applies cumulatively to the Articles of Association, not for each incremental increase.
3. Strict Interpretation of Fiscal Statutes: Any ambiguity in the taxing statute must favor the taxpayer, following precedents like CWT v. Ellis Bridge Gymkhana.

H) JUDGMENT

a. Ratio Decidendi

1. Form No. 5’s Role: The Court ruled that Form No. 5 is not an “instrument” under Section 2(l) of the Stamp Act. It serves only as a procedural notice to the Registrar.
2. Articles of Association as Instrument: The Articles are the operative document for stamp duty under Article 10 of Schedule-I.
3. Cumulative Cap: The Rs. 25 lakh cap is cumulative and applies to the Articles as a whole. Subsequent increases in share capital do not necessitate further stamp duty if the cap is already met.

b. Obiter Dicta

The 2015 Amendment clarified the scope of the cap, introducing a separate charge for each increase in share capital. However, the amendment does not apply retrospectively.

c. Guidelines

1. Form No. 5 is not chargeable to stamp duty.
2. Stamp duty on Articles of Association applies cumulatively, with a cap applicable to the entire instrument.

I) CONCLUSION & COMMENTS

The judgment reaffirms principles of strict statutory interpretation in fiscal matters. By emphasizing the distinct roles of general and special laws, the Court upheld the taxpayer-friendly interpretation. The precedent underscores clarity in fiscal statutes to prevent administrative arbitrariness.

J) REFERENCES

1. Cases Cited:

   • Hindustan Lever v. State of Maharashtra, (2004) 9 SCC 438.
   • CWT v. Ellis Bridge Gymkhana, (1998) 1 SCC 384.
   • New Egerton Woollen Mills, In re, 1899 SCC OnLine All 22.

2. Statutes Referred:

   • Bombay Stamp Act, 1958.
   • Companies Act, 1956.
   • Maharashtra Stamp (Amendment) Act, 2015.

3. Additional Judgments:

   • S.E. Investments Ltd. v. Union of India, 2011 SCC OnLine Del 1867.
   • Collector of Stamps v. SE Investment Ltd., 2012 SCC OnLine Del 3857.