Case Title: LIFE INSURANCE CORPORATION OF INDIA VERSUS THE STATE OF RAJASTHAN AND ORS., CIVIL APPEAL NO. 3391 OF 2011
Summary
The Supreme Court dismissed appeals from the Life Insurance Corporation (LIC) against the State of Rajasthan’s demand for stamp duty of approximately Rs 1.19 crores. The court upheld the legislative authority of the state government to impose stamp duty on insurance policies executed within the state, subject to the rates established by Central legislation. The court clarified that the state government is not excluded from levying and collecting stamp duty under Entry 44 of List III, despite the power to prescribe the rate exclusively vesting with the Parliament.
The Rajasthan Stamp Law (Adaptation) Act, 1952, and the Rajasthan Stamp Rules, 1955 implement stamp duty on insurance policies issued by the appellant within the state. The charging provision of Section 3 of the Indian Stamp Act, 1899, mandates that the appellant pay stamp duty to the state government on insurance policies executed within the state. The court stated that the state government has the authority to impose stamp duty on the issuance of insurance policies within its jurisdiction and compel the appellant to pay the stamp duty.
The Rajasthan Stamp Law (Adaptation) Act, 1952, prevails over the Indian Stamp Act, 1899, on account of Article 254 (2) of the Constitution. The court determined that the state government’s imposition of stamp duty falls under the 1952 Act, a state law that has been enacted under Entry 44 of List III and has received Presidential assent, as required by Article 254.
The court concluded that the Rajasthan Stamp Law (Adaption) Act, 1952, is applicable to the current case and that the state legislature has the legislative authority to impose and collect stamp duty on insurance policies. The appellant is required to purchase India Insurance Stamps and pay the stamp duty to Rajasthan. The court directed the state government to refrain from enforcing the stamp duty in accordance with orders dated 16.09.2004, 16.10.2004, 11.10.2004, 01.11.2004, and 28.10.2004.
About the case
The Life Insurance Corporation (LIC) appeals submitted against the State of Rajasthan’s demand for stamp duty of approximately Rs 1.19 crores were dismissed by the Supreme Court on April 30. The Court upheld the legislative authority of the State to impose stamp duty on insurance policies that are executed within the State, subject to the rates established by the Central legislation.
According to the Bench, which consisted of Justices PS Narasimha and Aravind Kumar, the State’s authority and jurisdiction to impose and collect duties on policies would be determined by the factum of the insurance policies’ issuance address. In reversing the High Court’s findings, the court noted that the State of Rajasthan would have the authority and jurisdiction to levy and collect stamps, as the insurance policies were issued in the state.
Justice PS Narasimha’s judgment clarified that the state government is not excluded from levying and collecting the stamp duty under Entry 44 of List III, despite the fact that the power to prescribe the rate of the stamp duty exclusively vests with the Parliament, as per Entry 91 of List I.
“We have conducted a comprehensive examination of the provisions of the Rajasthan Stamp Law (Adaptation) Act, 1952 and the Rajasthan Stamp Rules, 1955 that implement stamp duty on insurance policies issued by the appellant within the state. The charging provision of Section 3 of the Indian Stamp Act, 1899, as it has been adapted to the state of Rajasthan, mandates that the appellant pay stamp duty to the state government on insurance policies executed within the state. According to Entry 91 of List I, the rate at which stamp duty is due on insurance policies issued under the 1952 Act has been derived from Schedule I of the central Act. The state government has thus validly enacted the charging provision under Entry 44 of List III. Therefore, the court stated that the state government has the authority to impose a stamp duty on the issuance of insurance policies within its jurisdiction and compel the appellant to pay the stamp duty.
The Rajasthan government demanded a stamp duty of Rs. 1.19 crores in response to the execution and issuance of insurance policies by the Life Insurance Corporation (LIC) in the Rajasthan State under the Rajasthan Stamp Law (Adaptation) Act, 1952 (“Old Stamp Law”). The demand was submitted by Rajasthan in accordance with the legislative authority to impose and collect stamp duty on insurance policies under Entry 44 of List III, at the rate established by the Parliament under Entry 91 of List I of the constitution.
The LIC protested the demand for the stamp duty, arguing that the State of Rajasthan lacks legislative competence to levy and demand stamp duty on the execution and issuance of insurance policies within the state. According to Entry 91 of List I, the Union Government is the sole body with the authority to levy and collect stamp duty on the execution and issuance of insurance policies.
Under Entry 44 of List III, the state government possesses legislative authority to impose stamp duty, subject to the rate specified in Entry 91 of List I. The court was presented with the inquiry of whether the state government possesses the legislative authority to charge and collect stamp duty on insurance policies in accordance with Entry 91 of List I, as read with Entry 44 of List III (Concurrent List). In affirmative, the court observed that the state government possesses the legislative authority to impose and collect stamp duty on insurance policies in accordance with Entry 91 of List I, as read with Entry 44 of List III.
Entry 91 of List I, according to the court, is not a charging provision; rather, it permits Parliament to establish the stamp duty rate that the State Government will impose on insurance policies issued within the state’s jurisdiction. “Under the Constitution (Entry 91 List I), the legislative competence and exclusive power to determine the rate of stamp duty on insurance policies are exclusively held by the Parliament,” the court stated.
According to the court, the State government has the authority to implement a law that imposes stamp duty on insurance policies by utilizing the rate established by the Parliament and sourcing legislative competence through Entry 44 of List III. Based on the judgment in VVS Rama Sharma v. State of Uttar Pradesh, the court determined that the authority to impose stamp duty under Entry 44 of List III is shared between the Union and the state. Consequently, the state is permitted to impose stamp duty on insurance policies issued within its jurisdiction, provided that the rate of stamp duty is consistent with the rate established by the Union under Entry 91 of List I. The court stated that the state of Rajasthan has the authority to impose and collect stamp duty on insurance policies under Entry 44 of List III, provided that the duty is imposed in accordance with the rate specified by a Parliamentary legislation under Entry 91 of List I, as is evident from the aforementioned precedents. The Rajasthan Stamp Law (Adaptation) Act, 1952, prevails over the Indian Stamp Act, 1899, on account of Article 254 (2) of the Constitution.
In the event that a state law regarding a matter in the Concurrent List is in conflict with the provisions of an earlier law passed by the Parliament or an existing law in that matter, Article 254(2) provides that the state law will prevail in that state “if it has been reserved for the consideration of the President and has received his assent.” The court determined that the state government’s imposition of stamp duty falls under the 1952 Act, a state law that has been enacted under Entry 44 of List III and has received Presidential assent, as required by Article 254. This determination was made by applying the test of Article 254(2) in the current case.
According to the court, the 1952 Act, which occupies the field in the present case, has undisputedly received Presidential assent. Consequently, it is superior to the Indian Stamp Act, 1899 in the context of the state of Rajasthan.
Final Thoughts
Upon the aforementioned premise, the court arrived at the subsequent conclusions:
“I. The preliminary issue concerning the applicability of the pertinent state law, the 1952 Act or the 1998 Act, is resolved by concluding that the Rajasthan Stamp Law (Adaption) Act, 1952, is applicable to the current case.”
II. We conclude that the state legislature possesses the legislative authority to impose and collect stamp duty on insurance policies under Entry 44 of List III, in accordance with the rate established by Parliament under Entry 91 of List I.
III. The appellant is required to purchase India Insurance Stamps and pay the stamp duty to the state of Rajasthan in order to execute insurance policies within the state of Rajasthan.
IV. Although we have maintained the state’s authority and jurisdiction to impose and collect stamp duty on insurance policies, we direct that the state government refrain from enforcing the stamp duty in accordance with the orders dated 16.09.2004, 16.10.2004, 11.10.2004, 01.11.2004, and 28.10.2004, under the facts and circumstances outlined above.
As such, the appeals were granted.
Mr. N. Venkatraman, A.S.G. (Arguing Counsel), Mr. C. Paramasivam, Adv. Mr. Nishant Sharma, Adv. Mr. V. Chandrasekara Bharthi, Adv. Ms. Amitha Chandramouli, Adv. Mr. Rahul Vijayakumar, Adv. Mr. Shivshankar G., Adv. Mr. Rakesh K. Sharma, AOR
The counsel for the respondent(s) is as follows: Dr. Manish Singhvi, Senior Advocate (Arguing Counsel), Ms. Shubhangi Agarwal, Mr. Apurv Singhvi, Mr. Rohan Darade, Mr. Milind Kumar, and the AOR.
