Dealing with instruments impounded – Indian stamp act


Throughout our lives, we come across various levels and types of transactions and documents. Some of these documents and transactions are of massive importance to us and the State. Without any mechanism of their regulation, it would be troublesome to keep a track of such transactions.

For this reason, the State introduced the process of registration. Now once this mechanism was sorted State also wanted to gain some form of revenue from such transactions and documents and in order to gain that revenue State introduced the system of stamp duty.

Indian Stamp Act was amended in 1899 by the British Government with the sole purpose of acting as a revenue-generating mechanism for the Government. This Act imposes liability to pay stamp duty on certain and specific documents. Indian Stamp Act acts as fiscal legislation.

Section 38: Instruments impounded how dealt with of Indian Stamp Act, 1899

(1) Where the person impounding an instrument under section 33 has by law or consent of parties authority to receive evidence and admits, such instrument in evidence upon payment of a penalty as provided by section 35 or of duty as provided by section 37, he shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf.

(2) In every other case, the person so impounding an instrument shall send it in original to the Collector.

Section 40: Collector’s power to stamp instruments impounded of Indian Stamp Act, 1899

(1) When the Collector impounds any instrument under section 33, or receives any instrument sent to him under section 38; sub-section (2), not being an instrument chargeable 42[with a duty not exceeding ten naye paise] only or a bill of exchange or promissory note, he shall adopt the following procedure:

(a) if he is of opinion that such instrument is duly stamped, or is not chargeable with duty, he shall certify by endorsement thereon that it is duly stamped, or that it is not so chargeable, as the case may be;

(b) if he is of opinion that such instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of the five rupees; or, if he thinks fit, 9[an amount not exceeding] ten times the amount of the proper duty or of the deficient portion thereof, whether such amount exceeds or falls short of five rupees:

PROVIDED that, when such instrument has been impounded only because it has been written in contravention of section 13 or section 14; the Collector may, if he thinks fit, remit the whole penalty prescribed by this section.

(2) Every certificate under clause (a) of sub-section (1) shall, for the purposes of this Act, be conclusive evidence of the matters stated therein.

(3) Where an instrument has been sent to the Collector under section 38, sub-section (2), the Collector shall, when he has dealt with it as provided by the section, return it to the impounding officer.

As we already know that Instruments are chargeable with duty but then it raises another question and that is how is the valuation of instruments is done, the answer to that question is from Section 20 to Section 27 excluding Section 22 of The Indian Stamp Act.

  • Section 20 of the Act states that where an instrument is chargeable in respect of money in any currency other than that of India then, in that case, the duty shall be calculated on Indian currency and the exchange rate shall be applicable on the date of the instrument.
  • Section 21 provides that where an instrument is chargeable with ad valorem duty in respect of stock, securities then, in that case, the value of the day is calculated by the average price of the stock or security in the day of the instrument. 
  • Section 23 deals with interest, it states that where interest is payable by the terms of an instrument in such a case the value of the duty shall not exceed the charge by which it would have been initially chargeable.
  • Section 24 states that duty is also payable on the amount of debt when a property is transferred wholly or partially.
  • Section 25 talks about the computation of duty in the case of annuity and it is as follows:
  • When the annuity payable is for a definite period and a certain amount then, in that case, it is the total amount.
  • When the annuity payable is for an indefinite period or in perpetuity and a certain amount then, in that case, it is the amount payable in the first 20 years from the date on which the first payment becomes due.
  • Section 26 states that where the instrument is chargeable with ad valorem duty but the value of the subject matter cannot be ascertained at the date of its execution, then, in that case, the executants can value the instrument as they please. However, they cannot recover under such a document any amount which is in excess of the amount of stamp duty that has been paid.
  • Section 27 sets that parties of an instrument are bound to set forth all the facts and circumstances affecting the chargeability of an instrument.

Under the Stamp Act, if the collector is unsure about the amount of duty chargeable for the instrument then, in that case, the collector may draw up a statement of the case and refer it to the Controlling Revenue Authority.


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