The main legal point established in the judgment is the interpretation of the definition of 'instrument' under the Stamp Act and the one-time measure of the maximum cap on stamp duty, emphasizing the special law of the Companies Act over the general law of the Stamp Act.

JUDGMENT :

SUDHANSHU DHULIA, J.

1. The State of Maharashtra is in appeal before us challenging the order of the Division Bench of Bombay High Court dated 18.08.2009, which has allowed the writ petition of the respondent, while setting aside the order of the Deputy Superintendent of Stamps, Maharashtra (appellant no.2).

We have heard learned counsel Mr. Aniruddha Joshi for the appellants and learned senior counsel Ms. Madhavi Divan for the respondents.

National Organic Chemical India Ltd. (respondent) was incorporated with an initial share capital of Rs.36 crores. In 1992 it increased its share capital to Rs. 600 crores and accordingly paid a stamp duty of Rs.1,12,80,000/- as per Article 10 of Schedule-I of the Bombay Stamp Act, 1958 (hereinafter “Stamp Act”). At that time, the provision read as under:

The State of Maharashtra (appellant no.1) on 02.08.1994 amended Article 10 and introduced a maximum cap of Rs.25 lakhs on stamp duty which would be payable by a company. The amending notification is reproduced below in part:

“In exercise of the powers conferred by clause (a) of Section 9 of the Bombay Stamp Act, 1958 (Born. LX of 1958), the Government of Maharashtra, having satisfied that it is necessary to do so in the public interest, hereby reduces, with effect from the 1st August, 1994, the maximum duty chargeable on Article of Association of a Company under Article 10 of Schedule-I to the said Act, to Rs. Twenty Five Lakhs.”

Subsequently, the respondent passed a resolution for a further increase in its share capital to Rs.1,200 crores and paid Rs. 25 lakhs as stamp duty when it filed its Notice in Form No.5, ¹[Form No. 5 of the Companies (Central Government’s) General Rules & Forms, 1965 is the prescribed form of notice, which has to be sent under Section 97 of the Companies Act.] pursuant to Section 97 of the Companies Act, 1956 (hereinafter “Companies Act”). However, according to the respondent this was done inadvertently as it was soon realised that stamp duty was not liable to be paid by them since the maximum stamp duty which was of Rs. 25 lakhs payable on Articles of Association as per the provisions of the Stamp Act, had already been paid by them in 1992. Consequently, the respondent wrote a letter to appellant no.2 seeking a refund of the payment of Stamp Duty of Rs. 25 lakhs.

This request was turned down by appellant no.2, vide Order dated 20.01.1998 where it was stated that whenever the authorised share capital of a company is increased, stamp duty is payable on each such occasion at the time of filing of Form No. 5 and it is not a one time measure. Aggrieved, the respondent filed a writ petition before the Bombay High Court challenging the aforesaid order and seeking refund of Stamp Duty of Rs. 25 lakhs with interest, paid by them inadvertently.

The Bombay High Court, after hearing the parties, concluded that Form No.5 is not an instrument as defined by Section 2 of the Stamp Act and that stamp duty can only be charged on Articles of Association, where the maximum duty (Rs.25 Lakhs), payable as per the amendment has already been paid by the respondent. The High Court allowed the writ petition and directed the appellants to refund Stamp Duty of Rs.25 lakhs along with interest @ 6% per annum.

3. Learned counsel for the appellants submits that a company increases its share capital by sending a notice in Form No.5 as per Section 97 of the Companies Act. Thus, he contends that every time a company increases its share capital, it is a separate taxing event and stamp duty is liable to be paid irrespective of whether the maximum amount payable under the section has previously been paid.

The learned counsel further relies on Section 14A of the Stamp Act to conte