Friday, 4 February 2022

allowance for spoiled stamp

 Provision to recover Allowance for Spoiled Stamp under the Stamp Act.

By Shreya Verma

We undergo multiple transactions throughout our lives. Also, we have been asked to get a document to be stamped. What is a stamp? why this Stamping is necessary? Can stamps be wasted? Can we be refunded if such a stamp is wasted or spoiled? These topics will be discussed in this article. 

 A stamp is a mark, seal or endorsement by an authority. The purpose of Stamping is to indicate the genuineness of a document through which transaction has been done also it is a way of securing revenue by the state. Spoiled Stamp means the one which has been rendered unfit for use as been disfigured.

  • When a stamp is spoiled: 

(1) When either unintentionally or mistakenly, an error/ omission has been committed, due to which the instrument has been rendered unfit for use. 

(2) Document is written on stamp paper but it has not been executed. 

(3) Bill of exchange or promissory note though stamped, 

- does not bear signature necessary for acceptance; or 

- is not being used in the intended manner;

- has been spoiled because of any error or omission and same has been substituted by other one.  

(4) Any instrument bearing stamp, though executed, but is a either void ab initio or unfit because of any error/ mistake or if it could not be executed because of refusal or death of acceptor.  

(5) If another instrument is used instead of instrument bearing stamp becomes spoiled.

  • Allowance for spoiled Stamp: Section 49 of the Indian Stamp Act lays down provisions regarding payment of allowance by the Collector in case it is, as per any circumstances mentioned therein, has been rendered to be unfit for use. 

In Section 47 of the Act, it can be seen that there are three situations which contemplates for the refund of the value of impressed spoiled stamps: 

(1) before the execution of any instrument, when the stamp on any paper is inadvertently or undesignedly spoiled, obliterated or otherwise rendered unfit for the intended purpose; 

(2) the stamp on any document which is written but wholly or partly but not signed or executed by any party thereto; 

(3) situations after execution of the instrument.

Chapter 5 of the Act deals with similar cases when either the stamp is spoiled or misused or has been rendered to be unfit by any other mean, then, the person who has bought such stamp by paying full duty and with Bonafide intention can get a refund by the collector. Purpose behind this provision is to compensate the Bonafide purchaser. 

  • So, if due to any of the reasons above any instrument is rendered unfit for use, then, an application for relief by way of allowance must be made within- 

  • Six months in case when no instrument is executed on stamp paper or 

  • If the stamp is executed, then the time has to be calculated from the date of instrument or execution whatever is the case. 

  • And as such instrument is spoiled by reason of refusal of any person to act under the instrument, then an application is to be made to the collector for allowance. Such anm application must be made within two months. 

  • How is this allowance given: As under section 53 allowance for spoiled stamp may be given by the collector by way of giving:

i. Stamp of same description. 

ii. Stamp of different description but same value. 

iii. Money of same value but after deducing 10 Paisa for each rupee. 

Thus, if a stamp is spoiled by any manner provided in the Act, then, upon an application to the collector, within 6 months of either receiving/ executing the instrument, if the same has not been executed or received allowance for spoiled stamp can be recovered. For this purpose, an application has to be made to the collector and if the collector is satisfied that the person has paid full duty with respect to such stamp and has a Bonafide intention then he may make an allowance by paying money of the amount of that stamp for issuing other stamps of the same amount.

The Supreme court Abdul Jaleel vs State Of Kerala 2005 held that, in the light of Section 47(c) it is clear that even after the execution of the document the Collector is empowered to make allowance and order refund of the value of the stamp, subject to the conditions stipulated therein.

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