Summary
Rajasthan could levy and collect stamp duty on insurance policies executed within the State at rates fixed by Parliament. The 1952 adaptation law governed the policies, and required Rajasthan-issued stamps. However, the Court prohibited collection under the disputed demands because the treasury had represented that India Insurance stamps were unavailable and outside its supply responsibility, while the statutory cash-payment mechanism excluded these instruments. Appeals were dismissed with this express relief.
Issues
- Whether Rajasthan had legislative competence to levy insurance stamp duty at Parliamentary rates.
- Which enactment governed policies executed before the 1998 Act commenced.
- Whether Rajasthan stamps were ordinarily required and whether the disputed demands could nevertheless be collected.
Provisions considered
- Articles 246, 254 and 265; Seventh Schedule, List I Entry 91, List II Entry 63, List III Entry 44, Constitution of IndiaRate-setting competence is separately distributed; levy provisions fall within concurrent competence subject to repugnancy rules and authority of law. Presidential assent supported the State adaptation law. (¶¶ 9, 10, 11, 12, 14, 16, 18, 19, 29, 30)
- Sections 2, 3(v), 3(vi) and 3A(4), Rajasthan Stamp Law (Adaptation) Act, 1952The adaptation law governed the pre-commencement policies and adopted the central insurance rates; its cash-payment provision excluded Entry 91 instruments. (¶¶ 8, 20, 21, 24, 31, 34, 35)
- Section 3 and Schedule I, Article 47(D), Indian Stamp Act, 1899, as adapted to RajasthanThe charging provision and adopted Parliamentary rates supported stamp duty on insurance policies executed within Rajasthan. (¶¶ 23, 24, 25, 31)
- Rules 2(d) and 3, Rajasthan Stamp Rules, 1955Payment ordinarily required stamps issued by the Rajasthan Government, rather than purchase outside the State. (¶¶ 22, 26)
- Section 3, Rajasthan Stamp Act, 1998The later charging provision applied from commencement and did not govern policies executed during 1993–94 to 2001–02. (¶ 8)
Held
- Duty is governed by the law in force when an instrument is executed. The policies pre-dated commencement of the 1998 Act on 27 May 2004, so the 1952 adaptation law applied despite the later recovery proceedings. (¶ 8)
- Parliament exclusively fixes insurance-policy stamp-duty rates under List I Entry 91, but levy and collection legislation falls within concurrent List III Entry 44. A State may adopt the Parliamentary rate without ambiguity or want of competence; Entry 44 encompasses this taxation power. (¶¶ 11, 12, 14, 16, 18, 19)
- The 1952 law and 1955 Rules required duty on policies executed within Rajasthan to be paid through State-issued stamps at the centrally prescribed rates. VVS Rama Sharma concerned different statutory rules and no corresponding assented State charging law; it did not negate Rajasthan’s requirement. (¶¶ 22, 24, 25, 26, 28, 29, 30, 31)
- The treasury letter acknowledged non-availability of India Insurance stamps and disclaimed responsibility for their supply. The High Court incorrectly confined the correspondence to agents’ licence-fee stamps and overlooked Section 3A(4), which excluded insurance policies from the alternative cash-payment mechanism. (¶¶ 32, 33, 34, 35)
- LIC had endeavoured to obtain stamps locally but lacked an available payment mechanism in these circumstances. While affirming Rajasthan’s power and the ordinary local-purchase obligation, the Court expressly directed that the five disputed demands must not be demanded or collected. That fact-specific relief qualified the formal dismissal of the appeals. (¶¶ 36, 37, 38)
Result
Appeals dismissed with express relief: State competence and ordinary Rajasthan-stamp requirement upheld, but collection under all five disputed demand orders prohibited; parties to bear own costs.