In a significant ruling the Bombay High Court held that levying stamp duty on delivery orders ( ‘DO’ ) by the Maharashtra Government is within the legislative competence of the State. The Petitions assailed the imposition, levy and collection of Stamp Duty by the 1st Respondent-State of Maharashtra on Delivery Orders ( DO ) under Article 29 of the Maharashtra Stamp Act, 1958, ( MSA ) where the supply of goods takes place in the course of import of such goods into the territory of India as being ultra vires Articles 246(1), 286(1)(b) and 286(2), read with Entries 41 and 83 of List I of Schedule VII of the Constitution of India.

The legislative competence of the State is questioned on the ground that the constitutional scheme confers exclusive legislative competence on the Union of India in respect of import and export across customs frontiers and the State has breached the said legislative field. The counsel for the petitioner submitted that when the goods are compulsorily unloaded for clearance in the customs area of the importing country, the custodian or the port is the ‘bailee’ and the consignee is the ‘bailor’ under Section 148 of the Indian Contract Act. Hence, the ‘bailee’- custodian is duty bound to return the goods to the ‘bailor’- consignee without any demand. It was also contended that there is no mandate requiring a DO under the Major Port Trusts Act, 1963 or the Customs Act of 1962 or the Customs Cargo Handling Regulation of 2009 or any other law. The use of a DO is thus redundant and is required only for administrative convenience.

The counsel for the State submitted that the MSA does not levy stamp duty on a transaction but always on an ‘instrument’. The mere fact of computation of stamp duty on the basis of value of property or otherwise does not make the tax on transaction. A Division Bench of Justices Neela Gokhale and GS Patel observed that “We hold that the action of the State of Maharashtra in levying stamp duty on ‘DO’ as provided in Article 29 of Schedule I of the MSA is well within the legislative competence of the State and does not intrude upon the legislative domain of the Parliament as reserved in Entries 41 and 83 of List I of Schedule VII of the Constitution of India and is not ultra vires Article 246(1), 286(1)(b) and 286(2) of the Constitution of India.”