# Life Insurance Corporation of India v. The State of Rajasthan and Ors

- **Citation:** 2024 INSC 358
- **Court:** Supreme Court of India
- **Decided:** 2024-04-30
- **Case number:** Civil Appeal No. 3391 of 2011
- **Bench:** Pamidighantam Sri Narasimha, Aravind Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/life-insurance-corporation-of-india-v-the-state-of-rajasthan-and-ors-37815
- **Pages:** 30

## Headnote

Whether the Rajasthan Stamp Law (Adaptation) Act, 1952 or the
Rajasthan Stamp Act, 1998 applies to the facts of the present case;
whether the state government has the legislative competence to
impose and collect stamp duty on policies of insurance as per
Entry 91 of List I r/w Entry 44 of List III; whether the 1952 Act
requires the purchase of insurance stamps from and payment of
stamp duty to the Rajasthan government for insurance policies
issued within the state; whether, in the facts of the present case,
the appellant is liable to pay stamp duty.
Headnotes
Rajasthan Stamp Law (Adaptation) Act, 1952 - Rajasthan
Stamp Rules, 1955 - Indian Stamp Act, 1899 - s.3; Schedule
I - Rajasthan Stamp Act, 1998 - Constitution of India - Entry
44 of List III, Entry 91 of List I - Power of the State to levy
and collect stamp duty on insurance policies executed within
the State - Appellant issued various insurance policies within
the State of Rajasthan however, purchased insurance stamps
from the State of Maharashtra - Demand for payment of stamp
duty by the State of Rajasthan - Validity:
Held: State of Rajasthan has the power to impose and collect stamp
duty on insurance policies under Entry 44 of List III, albeit such duty
must be imposed as per the rate prescribed by a Parliamentary
legislation under Entry 91 of List I - For the execution of insurance
policies within the state of Rajasthan, the appellant is bound to
purchase India Insurance Stamps and pay the stamp duty to the
State of Rajasthan - s.3 of Indian Stamp Act, 1899 as adapted to
the State of Rajasthan is the charging provision as per which the
appellant must pay stamp duty to the state government on insurance
policies executed within the state - The rate at which stamp duty
is payable on policies of insurance under the 1952 Act has been
242
[2024] 5 S.C.R.
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adopted from Schedule I of the central Act, in accordance with Entry
91 of List I - The charging provision has thus been validly enacted
by the state government under Entry 44 of List III - Therefore, the
state government in the present case can impose stamp duty on
the issuance of insurance policies within its territory and require
the payment of such stamp duty by the appellant - Hence, the
commencement of proceedings for recovery of stamp duty under
the state law and the rules made thereunder was legal, valid, and
justified - However, in the facts and circumstances of the present
case, the state government shall not demand and collect the stamp
duty as per the orders dtd.16.09.2004, 16.10.2004, 11.10.2004,
01.11.2004, and 28.10.2004 - Impugned judgment of the High
Court affirmed. [Paras 16, 37, 31, 38]
Rajasthan Stamp Law (Adaptation) Act, 1952 - Rajasthan
Stamp Act, 1998 - s.3 - Insurance policies issued between
1993-94 to 2001-02 - Stamp duty leviable under the 1952 Act
or the 1998 Act:
Held: Stamp duty must be levied as per the law in force as on
the date of execution of the instrument - The charging provision
i.e. s.3 of the 1998 Act, imposed stamp duty on every instrument
mentioned in the Schedule that is executed in the state on or
after the date of commencement of the Act - 1998 Act came into
force only on 27.05.2004 - Hence, at the time that the relevant
instruments were executed, the 1952 Act was still in force and the
stamp duty was leviable under the same. [Para 8]
Rajasthan Stamp Law (Adaptation) Act, 1952 - ss.2, 3(v),
(vi) - Application of Indian Stamp Act, 1899 - Adaptations
- Schedule I of the 1899 Act - Rajasthan Stamp Rules, 1955
- rr.2 (d), 3 - Liability to pay stamp duty under the 1952 Act:
Held: r.3, r/w r.2(d), provides that the stamps issued by the State
government will indicate the payment of stamp duty chargeable on an
instrument - Therefore, the stamp must be issued by and the stamp
duty must be paid to the State government for an instrument to be
'duly stamped' under the 1952 Act - State has the power to collect
stamp duty under s.3 of the Indian Stamp Act, 1899 a

## Text

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* Author
[2024] 5 S.C.R. 241 : 2024 INSC 358
Life Insurance Corporation of India
v.
The State of Rajasthan and Ors.
(Civil Appeal No. 3391 of 2011)
30 April 2024
[Pamidighantam Sri Narasimha* and Aravind Kumar, JJ.]
Issue for Consideration
Whether the Rajasthan Stamp Law (Adaptation) Act, 1952 or the
Rajasthan Stamp Act, 1998 applies to the facts of the present case;
whether the state government has the legislative competence to
impose and collect stamp duty on policies of insurance as per
Entry 91 of List I r/w Entry 44 of List III; whether the 1952 Act
requires the purchase of insurance stamps from and payment of
stamp duty to the Rajasthan government for insurance policies
issued within the state; whether, in the facts of the present case,
the appellant is liable to pay stamp duty.
Headnotes
Rajasthan Stamp Law (Adaptation) Act, 1952 - Rajasthan
Stamp Rules, 1955 - Indian Stamp Act, 1899 - s.3; Schedule
I - Rajasthan Stamp Act, 1998 - Constitution of India - Entry
44 of List III, Entry 91 of List I - Power of the State to levy
and collect stamp duty on insurance policies executed within
the State - Appellant issued various insurance policies within
the State of Rajasthan however, purchased insurance stamps
from the State of Maharashtra - Demand for payment of stamp
duty by the State of Rajasthan - Validity:
Held: State of Rajasthan has the power to impose and collect stamp
duty on insurance policies under Entry 44 of List III, albeit such duty
must be imposed as per the rate prescribed by a Parliamentary
legislation under Entry 91 of List I - For the execution of insurance
policies within the state of Rajasthan, the appellant is bound to
purchase India Insurance Stamps and pay the stamp duty to the
State of Rajasthan - s.3 of Indian Stamp Act, 1899 as adapted to
the State of Rajasthan is the charging provision as per which the
appellant must pay stamp duty to the state government on insurance
policies executed within the state - The rate at which stamp duty
is payable on policies of insurance under the 1952 Act has been
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adopted from Schedule I of the central Act, in accordance with Entry
91 of List I - The charging provision has thus been validly enacted
by the state government under Entry 44 of List III - Therefore, the
state government in the present case can impose stamp duty on
the issuance of insurance policies within its territory and require
the payment of such stamp duty by the appellant - Hence, the
commencement of proceedings for recovery of stamp duty under
the state law and the rules made thereunder was legal, valid, and
justified - However, in the facts and circumstances of the present
case, the state government shall not demand and collect the stamp
duty as per the orders dtd.16.09.2004, 16.10.2004, 11.10.2004,
01.11.2004, and 28.10.2004 - Impugned judgment of the High
Court affirmed. [Paras 16, 37, 31, 38]
Rajasthan Stamp Law (Adaptation) Act, 1952 - Rajasthan
Stamp Act, 1998 - s.3 - Insurance policies issued between
1993-94 to 2001-02 - Stamp duty leviable under the 1952 Act
or the 1998 Act:
Held: Stamp duty must be levied as per the law in force as on
the date of execution of the instrument - The charging provision
i.e. s.3 of the 1998 Act, imposed stamp duty on every instrument
mentioned in the Schedule that is executed in the state on or
after the date of commencement of the Act - 1998 Act came into
force only on 27.05.2004 - Hence, at the time that the relevant
instruments were executed, the 1952 Act was still in force and the
stamp duty was leviable under the same. [Para 8]
Rajasthan Stamp Law (Adaptation) Act, 1952 - ss.2, 3(v),
(vi) - Application of Indian Stamp Act, 1899 - Adaptations
- Schedule I of the 1899 Act - Rajasthan Stamp Rules, 1955
- rr.2 (d), 3 - Liability to pay stamp duty under the 1952 Act:
Held: r.3, r/w r.2(d), provides that the stamps issued by the State
government will indicate the payment of stamp duty chargeable on an
instrument - Therefore, the stamp must be issued by and the stamp
duty must be paid to the State government for an instrument to be
'duly stamped' under the 1952 Act - State has the power to collect
stamp duty under s.3 of the Indian Stamp Act, 1899 as adapted
to the state of Rajasthan that provides that an instrument shall be
chargeable with the duty of the amount indicated in the Schedule if
it is executed within the state of Rajasthan - The mandate of s.3 is
also found in r.3 that provides for "mode of payment" - r.3, read with
r.2(d), provides that the duty with which any instrument is chargeable
[2024] 5 S.C.R.
243
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
shall be paid by means of a stamp issued by the state government -
The relevant event flowing from s.3 and r.3 authorising the levy and
imposition of stamp duty is the execution of the policy of insurance
within the state - The liability to purchase the stamps from the state
of Rajasthan is therefore clear and unambiguous - Consequently,
for instruments executed within the state, the purchase of stamps
from outside the state will equate to evasion of stamp duty and the
instrument will not be 'duly stamped'. [Paras 22, 26]
Rajasthan Stamp Law (Adaptation) Act, 1952 - s.3A(1) -
Appellant issued various insurance policies within the state
of Rajasthan and was required to affix stamps by paying
stamp duty on such policies - It wrote to the Collector, Jaipur
regarding the non-availability of 'Agents License Fee stamps'
- Plea of the appellant that in view of the letter of the Treasury
Officer, Jaipur dated 07.10.1991 stating that 'India Insurance
Stamps' are the property of the central government and their
supply and distribution is not related to their department, they
were compelled to purchase the stamps from Maharashtra,
without which they could not have issued the insurance
policies in the state of Rajasthan - High Court without taking
note of the aforesaid letter held that the correspondence of
the appellant with the department pertained to Agents License
Fee stamps and even if the stamps were unavailable, the
appellant was duty-bound to pay the stamp duty to the state
government in cash as provided under s.3A(1) - Propriety:
Held: High Court evidently did not take note of the letter dated
07.10.1991 - Further, it entirely failed to consider sub-section
(4) which excludes instruments under Entry 91, List I from the
application of s.3A - Therefore, the High Court also erred in holding
that the appellant could have paid the stamp duty in cash - In view
of the above circumstances, the appellant had no choice but to
purchase the insurance stamps from outside the state - While it
made every endeavour to purchase the stamp from within the state,
due to the letter by the department and the lack of mechanism for
payment of stamp duty under the 1952 Act in case of unavailability
of insurance stamps, it was unable to purchase the stamps and
pay the stamp duty to the Rajasthan government. [Para 36]
Constitution of India - Seventh Schedule - Stamp duty -
Entry 91 of List I, Entry 63 of List II, and Entry 44 of List III
- Distribution of legislative competence:
244
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Held: A combined reading of the constitutional scheme shows
that the power to prescribe the rate of duty is mutually exclusive
and has been clearly demarcated between the Parliament and the
legislatures of the state - Insurance policies, which are the relevant
instrument for the purpose of the present case, fall under Entry
91 of List I for the purpose of prescription of rate of duty - This
means that only the Parliament holds the exclusive power and the
legislative competence under the Constitution to prescribe the rate
of stamp duty on insurance policies. [Para 12]
Rajasthan Stamp Law (Adaptation) Act, 1952 - Indian Stamp
Act, 1899 - Constitution of India - Article 254; Entry 44, List III:
Held: In the present case, the imposition of stamp duty by the
state government was under the 1952 Act, which is a state law
that has been enacted under Entry 44 of List III, and has received
Presidential assent as contemplated under Article 254 - Article
254(2) clearly stipulates that when a state law with respect to a
matter in the Concurrent List is repugnant to the provisions of an
earlier law made by the Parliament or an existing law with respect
to that matter, then the law passed by the state shall prevail in that
state "if it has been reserved for the consideration of the President
and has received his assent" - The 1952 Act that occupies the
field in the present case has undisputedly received Presidential
assent and hence it prevails over the Indian Stamp Act, 1899 so
far as the state of Rajasthan is concerned. [Para 29]
Tax/Taxation - Tax law - Plea that the rate of taxation is an
essential component for a valid imposition of tax and since
the State legislature cannot prescribe the rate of stamp duty
on insurance policies, there can be no valid imposition of
stamp duty on these instruments by way of a state enactment:
Held: Rejected - Even if the State legislature cannot prescribe the
rate of stamp duty, it can levy such duty at the rate as provided by
the Parliament - In the present case, while it is true that the State
cannot prescribe the rate of duty on insurance policies, that by itself
does not mean that there is ambiguity or lack of clarity regarding
the rate of such duty - Rather, the rate of duty is unambiguous,
clear, and defined by the Parliament and is adopted by the state
to levy and collect stamp duty. [Para 18]
Constitution of India - Entry 44 of List III; Entry 91 of List
I - Contention as regards whether Entry 44 of List III is a
taxation entry:
[2024] 5 S.C.R.
245
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
Held: Entry 44 of List III is a taxation entry that falls under the
Concurrent List - State legislature has the legislative competence
to impose and collect stamp duty on policies of insurance under
Entry 44 of List III, as per the rate prescribed by the Parliament
under Entry 91 of List I. [Para 19]
Case Law Cited
VVS Rama Sharma v. State of Uttar Pradesh [2009] 5
SCR 1159 : (2009) 7 SCC 234; Govind Saran Ganga
Saran v. Commissioner of Sales Tax [1985] 3 SCR 985 :
(1985) Supp SCC 205; Mathuram Agrawal v. State of
Madhya Pradesh [1999] Supp. 4 SCR 195 : (1999) 8
SCC 667 - distinguished.
State of West Bengal v. Kesoram Industries [2004] 1 SCR
564 : 7 (2004) 10 SCC 201; State of Karnataka v. State
of Meghalaya [2022] 18 SCR 516 : (2023) 4 SCC 416;
Bar Council of Uttar Pradesh v. State of Uttar Pradesh
[1973] 2 SCR 1073 : (1973) 1 SCC 261; Vijay v. Union of
India [2023] 15 SCR 293 : (2023) SCC OnLine SC 1585
: 2023 INSC 1030; Government of Andhra Pradesh v. P.
Laxmi Devi [2008] 3 SCR 330 : (2008) 4 SCC 720; UP
Electric Supply Co Ltd v. R.K. Shukla [1970] 1 SCR 507
(1969) 2 SCC 400; M. Karunanidhi v. Union of India [1979]
3 SCR 254 : (1979) 3 SCC 431; Balaji v. ITO [1962] 2
SCR 983 : AIR (1962) SC 123; Municipal Council, Kota,
Rajasthan v. Delhi Cloth and General Mills Co. Ltd, Delhi
[2001] 2 SCR 287 : (2001) 3 SCC 654 - referred to.
List of Acts
Rajasthan Stamp Law (Adaptation) Act, 1952; Indian Stamp Act,
1899; Rajasthan Stamp Act, 1998; Rajasthan Stamp Rules, 1955;
Constitution of India.
List of Keywords
Stamp duty; Liability to pay stamp duty; Evasion of stamp duty;
Imposition and collection of stamp duty on policies of insurance;
Purchase of insurance stamps; Payment of stamp duty; Insurance
policies issued/executed within the State; Recovery of stamp duty;
Stamp duty chargeable on instrument; Rate of stamp duty on
insurance policies; Purchase of stamps from outside the State;
'duly stamped'; Taxation entry.
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Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3391 of 2011
From the Judgment and Order dated 21.02.2011 of the High Court of
Rajasthan at Jaipur in DBCSA No. 670 of 2004
With
Civil Appeal Nos. 3849, 3393, 3394 and 3395 of 2011
Appearances for Parties
N. Venkatraman, A.S.G., C.Paramasivam, Nishant Sharma,
V. Chandrasekara Bharthi, Ms. Amitha Chandramouli, Rahul
Vijayakumar, Shivshankar G., Rakesh K. Sharma, Advs. for the
Appellant.
Dr. Manish Singhvi, Sr. Adv., Ms. Shubhangi Agarwal, Apurv Singhvi,
Rohan Darade, Milind Kumar, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
Pamidighantam Sri Narasimha, J.
1.
The issue for consideration is whether the state of Rajasthan has
the power and jurisdiction to levy and collect stamp duty on policies
of insurance issued within the state. For the reasons to follow, we
have rejected the contention of the Life Insurance Corporation, the
appellant herein, regarding the lack of legislative competence of the
state and have also affirmed the power to levy and collect stamp
duty under the Rajasthan Stamp Law (Adaptation) Act, 19521 and
the rules made thereunder. While dismissing the appeal, we have
however set aside certain findings of the High Court and granted
relief to the appellant in the facts and circumstances of the case. We
will first refer to the necessary facts before analysing the provisions
and drawing our conclusions.
2.
Facts: The appellant issued various insurance policies within the state
of Rajasthan between 1993-94 and 2001-02. As per the prevailing
law relating to stamp duty, the appellant was required to affix stamps
1
Hereinafter '1952 Act'.
[2024] 5 S.C.R.
247
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
by paying stamp duty on the policies of insurance issued by it in
accordance with the Indian Stamp Act, 1899, as adapted to the state
of Rajasthan by the 1952 Act.
2.1 On 19.08.1991, the appellant wrote to the Collector, Jaipur
regarding the non-availability of 'Agents License Fee stamps'. On
07.10.1991, the Treasury Officer, Jaipur replied to the appellant
that 'India Insurance Stamps' are the property of the central
government and their supply and distribution is not related to
their department.
2.2 On 15.04.2004 and 06.05.2004, the Inspector General
(Registration and Stamps) Rajasthan, Ajmer issued a letter to
the appellant to deposit a sum of Rs. 1.19 crores for causing
loss of revenue to the state of Rajasthan as it had purchased
insurance stamps between 1993-94 and 2001-02 from the state
of Maharashtra for insurance policies that were issued within the
state of Rajasthan. Pursuantly, the Additional Collector (Stamps),
Jaipur issued a show-cause notice under Section 37(5) of the
Rajasthan Stamp Act, 19982 for payment of the amount.
2.3 By order dated 16.09.2004, the Additional Collector (Stamps),
Jaipur confirmed the show-cause notice and directed
the appellant to deposit the amount. It was held that the
correspondence between the appellant and the department
pertained to Agents Fee Stamps and not India Insurance stamps
that are affixed on insurance policies and were available at the
relevant time. Similar orders were passed on 16.10.2004 for
Rs. 1.07 crores, 11.10.2004 for Rs. 1.18 crores, 01.11.2004
for Rs. 1.87 crores, and 28.10.2004 for Rs. 43.68 lakhs. The
appellant also challenged these orders by way of separate
writ petitions, which have been disposed of in the judgment
impugned before us.3
2.4 The appellant filed a writ petition challenging the order of
the Additional Collector dated 16.09.2004, which came to be
2
Hereinafter '1998 Act'.
3
In D.B. Civil Writ Petition No. 3418/2006, D.B. Civil Writ Petition No. 3419/2006, and D.B. Civil Writ
Petition No. 3420/2006, and D.B. Civil Writ Petition No. 8187/2004, judgment dated 21.02.2011
('impugned judgment').
248
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dismissed by the High Court single judge4 on the ground that
the appellant has an alternative efficacious remedy of filing a
revision under Section 65 of the Rajasthan Stamp Act.
2.5 The appellant preferred a writ appeal before the division bench,
which was initially disposed of by an order dated 11.12.2004
wherein the High Court directed the Chief Secretary of the
Rajasthan government to constitute a High Powered Committee
under his chairmanship to decide the matter by a reasoned
order. It was also held that if either party is dissatisfied with
the decision of the committee, they could file for revival of the
writ appeal. The Committee constituted pursuant to this order
rejected the appellant's representation, due to which the writ
appeal was restored and decided in the impugned judgment5.
3.
Reasoning of the High Court: It is necessary to briefly discuss
the reasoning of the High Court in dismissing the writ appeal and
confirming the imposition of stamp duty. The High Court relied
on Sections 2, 3(v), and 3A of the 1952 Act read with Rules 2(d)
and 3 of the Rajasthan Stamp Rules, 1955. Section 2 provides that
subject to the other provisions of this Act, the Indian Stamp Act, 1899
shall apply to the whole state of Rajasthan on and from 01.04.1958.
Section 3(v) provides that reference in the Indian Act to 'government'
shall, unless the context otherwise requires, be construed as reference
to the state government. Section 3A(1) provides for payment of stamp
duty in cash when stamps are not available for sale.
3.1 Rule 2(d) of the Rajasthan Stamp Rules, 1955 defines
government as state government and Rule 3 provides for the
mode of payment of stamp duty to the state government.
3.2 Relying on these provisions, specifically Section 3A(1), the High
Court held that the appellant should have paid the stamp duty
in cash and the receipt would be affixed on the instrument as
envisaged under this provision. It was also held that there was
no legal sanction under the scheme of the Act that permits the
appellant to purchase such stamps from outside the state in case
4
In S.B. Civil Writ Petition No. 7013 of 2004, judgment dated 08.10.2004
5
In D.B. Civil Special Appeal (Writ) No. 670/2004, judgment dated 21.02.2011 ('impugned judgment).
[2024] 5 S.C.R.
249
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
of non-availability.6 It further held that in any case, only Agents
License Fee stamps were unavailable while the imposition of
stamp duty was on India Insurance Stamps.7
3.3 Relying on Rule 2(d) that defines 'government' as meaning
government of Rajasthan and Rule 3 that mandates payment
of stamp duty to the state government, the High Court held
that the stamps must only be purchased from the Rajasthan
government.8 The only exception provided is under Section 3A
when the person can deposit cash with the government treasury
in case of non-availability of stamps and affix the receipt of
challan with the instrument.9 The 1952 Act and the 1955 Rules
do not permit the appellant to purchase stamps from outside
the state that do not bear the superimposition of the words
'Rajasthan' or letters 'RAJ' as provided in the Explanation to
Rule 3.10 On such reading of the law and facts, the High Court
upheld the order of the Collector dated 16.09.2004.
4.
The High Court also dealt with the arguments by the parties on
the competence of the state government to impose stamp duty
on insurance policies based on the distribution of legislative fields
in the Seventh Schedule on stamp duty. The High Court held that
Entry 91 of List I (Union List) empowers the Parliament to enact a
law relating to rate of stamp duty in respect of various instruments,
including policies of insurance. Entry 44 of List III (Concurrent List)
empowers both the Parliament and state legislatures to enact laws
with respect to "stamp duties other than duties or fees collected by
means of judicial stamps, but not including rates of stamp duty".
4.1 The High Court held that the 1952 Act has been enacted under
Entry 44, List III and has received Presidential assent. It does
not occupy the field covered by Entry 91 of List I as it does
not fix or prescribe the rate of duty for insurance stamps but
only provides for the collection of stamp duty. The High Court
6
Impugned judgment, p. 15
7
ibid.
8
ibid, p.17
9
ibid.
10
ibid.
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hence rejected the submission by the appellant that the state
government does not have the power to demand payment for
insurance stamps as they fall under the Union List.
4.2 It also rejected the appellant's reliance on this Court's judgment in
VVS Rama Sharma v. State of Uttar Pradesh11 by differentiating
it as in that case, there was no state law that had received
Presidential assent and instead the consideration was under
Rule 115A of the UP Stamp Rules, 1942.12 Since the 1952 Act
had received Presidential assent, it was held to be a special law
that has overriding effect, which was not the case in VVS Rama
Sharma (supra) where the Indian Stamp Act read with rules
framed by the state of UP was applicable.13 It also differentiated
the case on facts as VVS Rama Sharma (supra) pertained to
the commission of criminal offences under the Indian Penal
Code and the Indian Stamp Act, 1899.14
5.
Submissions by the appellant: The learned ASG, Mr. N. Venkataraman,
appeared on behalf of the appellant and has made two primary
arguments. The gist of his submission is: First, that on the basis
of Entry 91 of List I, Entry 63 of List II, and Entry 44 of List III, the
state of Rajasthan does not have the legislative competence to
impose and collect stamp duty on insurance policies as the same
falls under the Union List. Second, that the show-cause notice and
the proceedings are under the 1998 Act, which does not provide
for imposition of stamp duty by the state on policies of insurance.
Alternatively, even if the 1952 Act applies, the appellant had no
option but to purchase the stamps from Maharashtra due to their
admitted unavailability and in view of Section 3A(4) of the 1952 Act.
The detailed arguments are as follows:
5.1 Learned ASG has relied on Entry 47 of List I on insurance and
Entry 91 of List I that empowers the Parliament to prescribe
the rate of stamp duty in respect of bills of exchange, cheques,
promissory notes, bills of lading, letters of credit, policies of
insurance, transfer of shares, debentures, proxies and receipts.
11
[2009] 5 SCR 1159 : (2009) 7 SCC 234
12
Impugned judgment, p. 19
13
ibid, p. 20
14
ibid.
[2024] 5 S.C.R.
251
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
He has argued that since insurance falls under the Union list
and more specifically, since only the Union can prescribe the
rate of stamp duty on insurance policies, the state government
cannot demand that the stamp duty on insurance policies
must necessarily be paid to it and that the stamps cannot be
purchased from other states. He relied on VVS Rama Sharma
(supra) on the point that a state cannot require that insurance
stamps, which are property of the central government, must be
purchased only from that particular state when the insurance
policy is issued within its territory. Challenging the imposition
of stamp duty by the state government, the learned ASG has
further submitted that a levy of stamp duty is in the nature of
tax and that there is no valid imposition of tax unless there is
a rate of taxation. Relying on Govind Saran Ganga Saran v.
Commissioner of Sales Tax15 and Mathuram Agrawal v. State
of Madhya Pradesh16, he has submitted that the rate of stamp
duty must be clearly and unambiguously ascertainable, without
which there is no valid tax law. Since the state does not have
the domain competence to prescribe the rate of stamp duty
in the present case, it cannot validly impose and demand the
payment of such duty. Lastly, the learned ASG has argued that
Entry 44 of List III is not in the nature of a taxation entry by
relying on State of West Bengal v. Kesoram Industries17 and
State of Karnataka v. State of Meghalaya18. He submits that it is
well-settled in taxation law that entries pertaining to taxation are
clearly demarcated between the Union List and the State List.
There is no head of taxation in the Concurrent List. Hence, the
state government cannot impose stamp duty on the appellant
by claiming legislative competence under Entry 44 of List III.
5.2 Apart from arguing that levy of stamp duty by the state is
contrary to the constitutional scheme, the learned ASG has
also argued that stamp duty cannot be imposed in the present
case under the specific state enactments. He has argued that
the 1998 Act applies in the present case as the notice for
15
[1985] 3 SCR 985 : 1985 Supp SCC 205, para 6
16
[1999] Supp. 4 SCR.195 : (1999) 8 SCC 667, para 12
17
[2004] 1 SCR 564 : (2004) 10 SCC 201
18
[2022] 18 SCR 516 : (2023) 4 SCC 416, para 92
252
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recovery has been issued under Section 37(5) of the 1998 Act.
Section 3 of the 1998 Act is the charging provision that provides
that instruments shall be chargeable with duty of the amount
indicated in the Schedule. By comparing entry 47 of Schedule
I of the Indian Stamp Act, 1899 (which provides the rates of
stamp duty for various kinds of policies of insurance) and the
Schedule under the 1998 Act, he has argued that there is no
parallel entry in the Schedule of the 1998 Act that provides the
rate of stamp duty on insurance policies. Since Section 3 only
provides for imposition of stamp duty as per rates prescribed
in the Schedule and there is no such rate of duty indicated,
the state government cannot demand stamp duty from the
appellant on insurance policies. Alternatively, the learned ASG
has argued that even if the 1952 Act applies, as considered
by the High Court in the impugned judgment, the stamp duty
could not have been paid to the Rajasthan government in
the present case due to the admitted unavailability of India
Insurance stamps with the treasury. Relying on the letter from
the department dated 07.10.1991, he argued that the High Court
erred in holding that only Agents License Fee stamps were
unavailable when the letter clearly mentioned India Insurance
stamps. Further, the letter also stated that these stamps are
central government property and their supply and sale is not
related to the state government. Relying on this letter by the
department, the learned ASG has submitted that the government
could not have then demanded payment of stamp duty in 2004.
Lastly, he has argued that the High Court's reliance on Section
3A to hold that the duty could have been paid in cash in case
of unavailability of stamps is misplaced as sub-clause (4) of
Section 3A clearly stipulates that the provision does not apply
to payment of stamp duty chargeable on instruments specified
in Entry 91 of List I. Since insurance policies are an instrument
that fall under this entry, Section 3A does not apply to it and
the appellant could not have paid the stamp duty in cash. The
High Court erred in its conclusion as it had entirely failed to
consider this sub-clause. A similar provision is also contained
in Section 4(4) of the 1998 Act. Hence, he concluded that there
was no way for the appellant to have paid stamp duty to the
Rajasthan government and they had to purchase the stamps
[2024] 5 S.C.R.
253
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
from outside the state as non-payment of duty would lead to
evasion and an unstamped insurance policy would not be
admissible in evidence.
6.
Submissions by the respondent: Dr. Manish Singhvi, learned senior
counsel for the state, has argued that the state has the power to
impose and collect stamp duty on insurance policies under Entry
44 of List III. He has argued that while the power to prescribe the
rate of such duty falls within the exclusive domain of the Parliament,
the power to collect and impose the duty and to frame a charging
provision lies with the Parliament and the state legislatures under
Entry 44 of the Concurrent List, which is a sui generis provision. The
legislative competence of the states extends to collecting stamp duty
on instruments specified in Entry 91 of List I but does not extend
to prescribing the rate of duty for such instruments. The power to
prescribe the rate of stamp duty is clearly demarcated between the
Union and the states through Entry 91 of List I and Entry 63 of List
II. The state government can impose the duty at such rate that is
prescribed by the Parliament. He has also argued that Entry 44 of
List III is a taxation provision, as has been clearly held in Bar Council
of Uttar Pradesh v. State of Uttar Pradesh19.
6.1 Dr. Manish Singhvi further submits that the 1952 Act applies
since the period of levy is for policies issued between 1993-94
to 2001-02, which is prior to the 1998 Act coming into force
(on 27.05.2004). The 1952 Act received Presidential assent
and hence prevailed over the Indian Stamp Act, 1899 in the
state as per Article 254(2). Section 3(vi) of this Act adopts
the Schedule from the central Act for the purpose of rate of
stamp duty. Hence, the stamp duty must be paid to the state
government for insurance transactions occurring within the
territory of the state after the 1952 Act came into force as
per the rate prescribed in entry 47 of Schedule I of the Indian
Stamp Act. Alternatively, he has argued that even if the 1998
Act applies, Sections 90 and 91 of that Act have the effect
of adopting the Indian Stamp Act with respect to instruments
contained in Entry 91 of List I. Lastly, he has differentiated the
present case from VVS Rama Sharma (supra) as that case
19
[1973] 2 SCR 1073 : (1973) 1 SCC 261
254
[2024] 5 S.C.R.
Digital Supreme Court Reports
pertained to the registration of a criminal case against the
officers of LIC for non-payment of stamp duty and the lack of
criminal intent, leading to the quashing of FIR.
7.
Issues: Having heard the learned ASG for the appellant and Dr.
Manish Singhvi for the respondent, the following issues arise for
our consideration:
I.
Whether the 1952 Act or the 1998 Act applies to the facts of
the present case?
II.
Whether the state government has the legislative competence
to impose and collect stamp duty on policies of insurance as
per Entry 91 of List I read with Entry 44 of List III?
III.
Whether the 1952 Act requires the purchase of insurance stamps
from and payment of stamp duty to the Rajasthan government
for insurance policies issued within the state?
IV.
Whether, in the facts of the present case, the appellant is liable
to pay stamp duty?
I.
Applicable Law
8.
It is first important to determine whether stamp duty in the present
case can be imposed under the 1952 Act or the 1998 Act. The High
Court has relied on the provisions of the 1952 Act while arriving at
its conclusion. We agree with the High Court on this aspect as the
stamp duty must be levied as per the law in force as on the date
of execution of the instrument.20 In the present case, the insurance
policies were issued between 1993-94 to 2001-02. Section 3 of the
1998 Act21, which is the charging provision, imposes stamp duty on
every instrument mentioned in the Schedule that is executed in the
state on or after the date of commencement of the Act. The 1998 Act
came into force only on 27.05.2004 by way of a notification. Hence,
20
Vijay v. Union of India [2023] 15 SCR 293 2023 : SCC OnLine SC 1585, 2023 INSC 1030, para 11
21
The relevant portion of Section 3 of the 1998 Act reads:
"3. Instrument chargeable with duty.- Subject to the provisions of this Act and the exemptions
contained in the Schedule, the following instruments shall be chargeable with duty of the amount
indicated in the Schedule as the proper duty therefor respectively, that is to say,-
(a) every instrument mentioned in that Schedule, which, not having been previously executed by any
person, is executed in the State on or after the date of commencement of this Act;
(b) every instrument mentioned in that Schedule, which, not having been previously executed by any
person, is executed out of the State on or after the said date, relates to any matter or thing done or to be
done in the State and is received in the State, or relates to any property situate in the State."
[2024] 5 S.C.R.
255
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
at the time that the relevant instruments were executed, the 1952
Act was still in force and the stamp duty is leviable under the same.
II.
Legislative Competence
9.
The learned ASG has forcefully contended that the state does not
have the power to collect and levy stamp duty on insurance policies
under the state enactment as only the Union can prescribe the rate
of stamp duty for such instruments. He has taken us through the
constitutional scheme on the fields of legislation under the Seventh
Schedule on matters of stamp duty. The relevant entries are Entry
91 of List I, Entry 63 of List II, and Entry 44 of List III, which have
been extracted here for reference:
Entry 91 of List I:
"91. Rates of stamp duty in respect of bills of exchange,
cheques, promissory notes, bills of lading, letters of credit,
policies of insurance, transfer of shares, debentures,
proxies and receipts."
Entry 63 of List II:
"63. Rates of stamp duty in respect of documents other
than those specified in the provisions of List I with regard
to rates of stamp duty."
Entry 44 of List III:
"44. Stamp duties other than duties or fees collected by
means of judicial stamps, but not including rates of stamp
duty."
10. Article 246 of the Constitution states that the Parliament has the
exclusive power to make laws with respect to any matter in List I,
the Parliament and the legislatures of any state have the power to
make laws with respect to any matter in List III, and the legislature
of any state has the exclusive power to make laws for such state or
any part thereof with respect to any matter in List II.22
22
Article 246 reads:
"246. Subject-matter of laws made by Parliament and by the Legislatures of States.-(1)
Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with
respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred
to as the "Union List").
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of
256
[2024] 5 S.C.R.
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11. Reading the relevant entries of the Seventh Schedule in the context
of Article 246, the distribution of legislative competence with respect
to legislation on stamp duty is as follows. The Parliament has the
exclusive power to legislate on the rate of stamp duty with respect to
certain instruments, namely: bills of exchange, cheques, promissory
notes, bills of lading, letters of credit, policies of insurance, transfer
of shares, debentures, proxies and receipts, under Entry 91 of List
I. As per Entry 63 of List II, the legislatures of the states have the
exclusive power to legislate on the rate of stamp duty with respect
to documents other than those specified in Entry 91 of List I for their
state or any part of their state. In other words, there is a distribution
of instruments between the Parliament and the state legislatures as
regards the legislative competence to fix rates of stamp duty. However,
as per Entry 44 of List III, the Parliament and the legislatures of the
states have concurrent powers to legislate on stamp duties (other
than duties or fees collected by means of judicial stamps), but not
including rates of stamp duty.
12. A combined reading of the constitutional scheme shows that the
power to prescribe the rate of duty is mutually exclusive and has
been clearly demarcated between the Parliament and the legislatures
of the state.23 Insurance policies, which are the relevant instrument
for the purpose of the present case, fall under Entry 91 of List I
for the purpose of prescription of rate of duty. This means that
only the Parliament holds the exclusive power and the legislative
competence under the Constitution to prescribe the rate of stamp
duty on insurance policies. There is no dispute regarding this point.
13. The issue however that falls for our consideration is whether the state
government can enact a law that imposes stamp duty on insurance
policies by using the rate prescribed by the Parliament by sourcing
legislative competence through Entry 44 of List III.
any State also, have power to make laws with respect to any of the matters enumerated in List III in the
Seventh Schedule (in this Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such
State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule
(in this Constitution referred to as the "State List").
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not
included 2 [in a State] notwithstanding that such matter is a matter enumerated in the State List."
23
VVS Rama Sharma (supra), paras 14-15
[2024] 5 S.C.R.
257
Life Insurance Corporation of India v.
The State of Rajasthan and Ors.
14. This Court in VVS Rama Sharma (supra) has answered this question
in the affirmative and has held that under Entry 44 of List III, "the power
to levy stamp duty on all documents, is concurrent. But the power
to prescribe the rate of such levy is excluded from Entry 44 of List
III and is divided between Parliament and the State Legislatures."24
Therefore, the charging provision for imposition of stamp duty, even
on documents contained in Entry 91 of List I, can be enacted by both
the Parliament and the state legislatures, subject to the provisions
of Article 254.25 These principles have been summarised in VVS
Rama Sharma (supra) as follows:
"23. As mentioned earlier, under Entry 44 of List III, the
power to levy stamp duty on all documents is concurrent.
But the power to prescribe the rate of such levy is excluded
from Entry 44 of List III and is divided between Parliament
and the State Legislatures. If the instrument falls under
the categories mentioned in Entry 91 of List I, the power
to prescribe the rate will belong to Parliament, and for all
other instruments or documents, the power to prescribe
the rate belongs to the State Legislature under Entry 63
of List II. Therefore, the meaning of Entry 44 of List III is
that excluding the power to prescribe the rate, the charging
provisions of a law relating to stamp duty can be made both
by the Union and the State Legislature, in the concurrent
sphere, subject to Article 254 in case of repugnancy. So,
in the case at hand, it is Entry 91 of List I of the Seventh
Schedule which would be applicable and the States do
not have the power to circumvent a Central law."
15. In a recent judgment in Vijay v. Union of India,26 this Court has again
held that the power to levy stamp duty on all documents is concurrent
under Entry 44 of List III. Only the power to prescribe the rate of
such duty is with the Parliament, and subject to Entry 91 of List I,
with the state legislatures.27
24
ibid, para 14
25
ibid, para 15
26
[2023] 15 SCR 293 : 2023 SCC Online SC 1585, 2023 INSC 1030
27
ibid, para 12
258
[2024] 5 S.C.R.
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16. From the above precedents, it is clear that the state of Rajasthan has
the power to impose and collect stamp duty on insurance policies
under Entry 44 of List III, albeit such duty must be imposed as per the
rate prescribed by a Parliamentary legislation under Entry 91 of List I.
17. In view of the above explanation, the issue relating to legislative
competence raised by the learned ASG conclusively ends. However,
the learned ASG has raised additional arguments regarding the
requirements of a valid tax law and on whether Entry 44 of List III is a
taxation entry.