Stamp Duty Is On The Instrument, Not The Transaction: Bombay High Court Strikes Down ₹50 Crore Levy On Amalgamation

In a decisive ruling on stamp duty liability in corporate amalgamations, the Bombay High Court in Schaeffler India Ltd. v. Chief Controlling Revenue Authority, Pune reaffirmed a foundational principle of stamp law:

“It is the order of NCLT, which is chargeable with duty.”

Justice Sharmila U. Deshmukh held that under Sections 2(g)(iv), 2(l), Section 3 and Article 25(da) of the Maharashtra Stamp Act, 1958, the instrument chargeable to duty is the order sanctioning the scheme, and not the underlying amalgamation transaction.

The Revenue’s attempt to levy ₹50 crores by treating the merger of two transferor companies as two distinct transactions was found legally unsustainable. The Court made it clear that the focus must remain on the instrument — the NCLT Mumbai order dated 8 October 2018 — and not on the economic components of the scheme.

“Section 5 Cannot Be Used To Dissect A Composite Scheme”

The State relied on Section 5 of the Stamp Act, arguing that since two companies — INA Bearings and LuK India — were amalgamated with the petitioner, the scheme involved “two distinct matters” attracting separate duty.

The Court rejected this construction.

“The application of Section 5 requires going into the underlying transaction which cannot be done in respect of order of sanction of scheme.”

Section 5 applies only where an instrument relates to distinct and independent matters incapable of being blended into one aggregate transaction. A composite amalgamation scheme sanctioned under Sections 230–232 of the Companies Act does not meet that test.

The Court found that the Revenue had impermissibly shifted the charge from the instrument to the transaction — a move contrary to settled law.

“Duty Is Attracted On The Instrument And Not On The Transaction”

Relying on the Full Bench decision in Chief Controlling Revenue Authority v. Reliance Industries Limited, the Court reiterated a binding principle:

“The duty is attracted on the instrument and not on transaction.”

Even where two High Courts sanction the same scheme, each order is an independent instrument. What cannot be done directly — levying duty on the scheme — cannot be achieved indirectly by dissecting it into components.

Applying this principle, the Court held that whether the scheme involved one transferor or two was immaterial. The only instrument lodged for adjudication in Maharashtra was the NCLT Mumbai order. That alone could be assessed.

“Mere Reference Does Not Bring The Chennai Order Into Maharashtra”

The Revenue further argued that since the NCLT Mumbai order referred to the NCLT Chennai order (which sanctioned the scheme qua LuK India), the Chennai order was effectively “brought into Maharashtra,” attracting duty.

The Court decisively rejected this submission.

“Mere reference to the same in the NCLT Mumbai order would not amount to that instrument of NCLT Chennai being brought in the State of Maharashtra.”

Section 19 of the Stamp Act applies only where an instrument executed outside the State is received in Maharashtra. The Chennai order was never lodged for adjudication in Maharashtra. Whether stamp duty was paid in Chennai was irrelevant to the assessment of the Mumbai order.

Jurisdiction, the Court clarified, cannot be extended through interpretative expansion.

“Composite Amalgamation Cannot Be Artificially Segregated”

The impugned orders had proceeded on the footing that two separate petitions were filed before NCLT Mumbai and that a common order was passed for “technical reasons.” The Court found this to be factually erroneous and legally flawed.

“The impugned order seeks to levy the stamp duty on the transaction by segregating the transactions into two different transactions.”

Agreeing with the Gujarat High Court in Ambuja Cements Limited, the Court held that such reconstruction runs counter to the true import of Section 5 and to the strict interpretation required in fiscal statutes.

Statutory Cap Reaffirmed — ₹25 Crores Maximum

Article 25(da) prescribes stamp duty on NCLT orders sanctioning amalgamations, subject to a maximum cap of ₹25 crores.

By treating the scheme as two transactions, the authorities had effectively doubled the statutory ceiling to ₹50 crores.

The Court quashed the impugned orders dated 25 March 2019 and 12 September 2022 and held that stamp duty was payable only on the NCLT Mumbai order, subject to the statutory cap of ₹25 crores.

Since the petitioner had already paid ₹50 crores under protest, the Court directed refund of the excess ₹25 crores within eight weeks, with interest at 6% per annum in case of delay.

A Clear Fiscal Principle Reaffirmed

This judgment strengthens three enduring principles of stamp jurisprudence:

“It is the instrument that is chargeable.”

“A composite scheme sanctioned by NCLT cannot be dissected under Section 5.”

“Mere reference to an out-of-state order does not confer jurisdiction.”

In doing so, the Bombay High Court has once again underscored that fiscal statutes cannot be stretched to enlarge liability beyond what the legislature clearly prescribes.

Date: 18 February 2026