Summary
The Supreme Court held that purchasers who obtained a High Court direction for refund of stamp duty paid on a lost, unused e-stamp paper were also entitled to interest, since money retained by the State without right carries a right to interest even absent a statutory provision; it awarded interest at 8% per annum on the amounts retained, computed at Rs. 4,35,968.
Issues
- Whether the appellants, who had been granted refund of Rs. 28,10,000 paid for an e-stamp paper that was lost before use, were entitled to interest on the refunded amount.
- Whether the absence of a statutory provision for interest on such a refund bars the award of interest.
Provisions considered
- Section 49(a) and Chapter V (allowances and refunds), Indian Stamp Act, 1899The Single Judge read 'obliterate' in Section 49(a) and the scheme of Chapter V to cover a lost, unengrossed e-stamp paper and ordered refund; the Supreme Court took note of those reasons when holding that the long retention of the amount justified interest. (¶¶ 7, 8, 30)
- Article 265, Constitution of IndiaRelied on by the Single Judge, in the extract the Supreme Court reproduced, to hold that the State could not retain stamp duty when no taxing event had occurred, as Article 265 bars collection, not merely levy, of tax without authority of law. (¶ 7)
- Section 34, Code of Civil Procedure, 1908Referred to, through the Constitution Bench decision in G.C. Roy, as embodying the principle that a person deprived of the use of money legitimately due is entitled to compensation, whether called interest, compensation or damages. (¶ 20)
Held
- The State's objection that the statute provides no interest on refund of the price of a lost e-stamp paper is without merit; the principle is meant to protect a citizen from unfair treatment by the State. (¶ 15)
- Interest is not a penalty but the normal accretion on capital; a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for that deprivation, whatever it is called. (¶¶ 16, 17, 18, 19, 20, 21, 22, 24)
- Where restitution is attracted, interest should follow, and the obligation to refund money received and retained without right carries with it the right to interest even without an express statutory provision; the Government cannot avoid paying interest for the period of undue retention. (¶¶ 25, 26, 27, 29)
- Given the Single Judge's reasons for holding that the refund could not be refused, the long retention of the amount, and the appellants having had to approach the High Court, interest was payable at 8% per annum from the date of the Single Judge's judgment on the full sum until part payment, and thereafter on the balance, with only the difference over the fixed-deposit rate for the final period. (¶ 30)
Result
Appeal disposed of; respondents directed to pay Rs. 4,35,968 as interest on the refunded stamp duty within two months.