The Delhi High Court recently quashed a 2014 order by the Collector of Stamps which had demanded that Ambuja Cement Ltd. pay around ₹218 crores as stamp duty following its 2011 merger with Ambuja Cements India Private Limited (ACIPL) [Ambuja Cement Ltd. vs. Collector of Stamps, Delhi].
Justice Sudhir Kumar Jain observed that the two merged companies were wholly owned subsidiaries of the same parent company, namely Holderind Investments Ltd., Mauritius.
The Court went on to note that a 1937 Central government notification exempted stamp duty payments when it came to the transfer of shares between subsidiaries of a common parent company (at least 90 per cent of shares in subsidiaries being held by the parent company) or if the transfer takes place between such a parent company and its subsidiary.
The Court found that this notification squarely applied to the present case.
“The petitioner (Ambuja Cement) and ACIPL were wholly owned subsidiaries of a common parent company – Holderind and therefore, the scheme of amalgamation and the merger order are squarely covered under the Notification no. 13 dated 25.12.1937 which exempts the said instruments from payment of stamp duty,” the Court held.
Under challenge was a March 2014 show cause notice and and ensuing order passed in August 2014 by the Collector of Stamps, Delhi against Ambuja Cement.
By this order, the cement manufacturer was ordered to pay over ₹218 crores as stamp duty for its merger with ACIPL. The Collector added that Ambuja was liable to pay stamp duty at the rate of 3 per cent for the issue of 353 crore equity shares pursuant to the merger.
The Collector also slapped a ₹69 crore penalty on Ambuja Cement, on claims that it had evaded the payment of stamp duty for the 2011 merger.
Ambuja Cement challenged this decision before the High Court, which granted it relief by setting aside the Collector's stamp duty demand on the basis of the 1937 notification.
The Court also observed that under Section 47A(3) of the Registration Act, 1908, the period of limitation within which the Collector of Stamps is to enquire about stamp duty payments is only two years from the date of the registration of an instrument.
In the present case, the Court observed that the Ambuja Cement had filed for the registration of the merger in 2011 while the show cause notice was issued by Collector was in 2014, which was beyond the two-year limitation period.
The Court, therefore, held that the show cause notice by Collector was also barred by limitation.
“Such suo-motu power can only be exercised within two years from the date of registration of the instrument. In the present case, the petitioner filed Form 21 with the Registrar of Companies for registration of the merger order on 07.12.2011 and the respondent issued the show-cause notice on 20.03.2014 which is beyond the period of limitation of two years as provided under section 47A (3),” the Court found.
Accordingly, the Court quashed the Collector's show-cause notice and the ensuing August 2014 order against Ambuja Cement, along with all consequential proceedings.
Senior Advocate Sudhanshu Batra, with advocates Vijay Kumar Singh, Adhip Ray, Shashwat Singh, Simran Sakunia and Simran Jeet represented Ambuja Cement.
Standing Counsel Santosh Kumar Tripathi, with advocates Divyam Nandrajog, Surbhi Soni and Rishabh Srivastava appeared for the Collector of Stamps, Delhi.
[Read Judgment]