Relief to BHEL: Andhra Pradesh HC quashes SCN for Non-Payment of Stamp Duty, Finds it issued without Jurisdiction [Read Order]

In the recent ruling, the High Court of Andhra Pradesh, quashed a show cause notice ( SCN ) issued to Bharat Heavy Electricals Ltd. ( BHEL ) for alleged non-payment of stamp duty, finding it was issued without jurisdiction and applied to an unregistered agreement, which falls outside the purview of Section 41-A of the Indian Stamp Act.

Bharat Heavy Electricals Ltd., appellant-assessee, a Public Sector Corporation involved in fabricating and operating machinery. It had entered into an agreement with M/s. NREDCAP to install wind tools for electricity generation.

In June 2015, the assessee received a notice under Section 41-A of the Indian Stamp Act, 1899, from the second respondent. The notice, based on information from the Vigilance and Enforcement Department, Ananthapuram, claimed the assessee executed a ₹1500 crore project under an unregistered agreement with M/s. NREDCAP. It stated that stamp duty of ₹75 lakhs was due and asked the assessee to either pay or submit objections.

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The assessee challenged the notice in W.P. No. 20420 of 2015, arguing it was without jurisdiction and violated the Indian Stamp Act. However, the Court dismissed the petition in January 2023, stating the assessee could raise objections before the second respondent and that the Court need not interfere at this stage.

In its appeal, the assessee argued that the notice was invalid. The main issues revolved around the applicability of Section 41-A, which specifically applied to registered documents, not unregistered ones, and the legality of issuing a SCN without jurisdiction.

The division bench comprising R.Raghunandan Rao(Justice) and Harinath.N.J(Justice) examined the case and ruled that the notice was issued without jurisdiction. It referred to the provisions of the Indian Stamp Act, including Section 41-A, which applies to registered documents and not to unregistered agreements like the one in question.

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The Court also noted that the second respondent had issued the notice based on the Vigilance Department's findings, but without independently applying its mind to the issue, which made the notice legally invalid.

The bench further considered whether Sections 33 and 73 of the Indian Stamp Act, cited by the Government Pleader, could provide jurisdiction for issuing the notice. However, these sections were found to be inapplicable in this case, particularly in light of the previous judgment by the Supreme Court that had struck down certain provisions related to inspection and seizure of documents.

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In short, the Court quashed the impugned notice as it was issued without jurisdiction and allowed the appeal, ordering that there would be no costs. All pending miscellaneous petitions were also closed.

To Read the full text of the Order CLICK HERE

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