Actual Use, Not Sale of Manufactured Goods, Determines Stamp Duty Classification: Supreme Court

The Hon’ble Supreme Court, in Harinder Singh Sodhi v. State of Rajasthan & Ors. (Civil Appeal arising out of SLP (C) No. 36745 of 2025) [2026 INSC 922], decided on August 24, 2026, held that the actual use of a property determines its valuation for the purposes of stamp duty under the Rajasthan Stamp Act, 1998, where the applicable state valuation guidelines prescribe rates based on the user. The Hon’ble Court further held that the sale of goods manufactured on industrial premises, including retail sale, does not by itself alter the character of the property from industrial to commercial.

The dispute concerned a gift deed relating to a multi-storey property in Jaipur which had been executed between two brothers and stamped on the basis of the valuation applicable to residential premises. The sub-registrar inspected the property and treated it as commercial on the ground that a showroom operated from the premises. The collector also inspected the property and found that manufacturing activity was being carried on. The Rajasthan Tax Board, after considering both inspection reports and the relevant government circular, agreed with the collector and treated the property as industrial.

The appellant contended that the property was being used for industrial purposes and had been registered as a factory under the Factories Act, 1948, as well as an industry with the District Industries Centre, Jaipur. It was further contended that the stamp duty had already been paid on the basis of residential valuation, which was higher than the valuation applicable to industrial land. The State, however, challenged the orders of the statutory authorities before the Hon’ble High Court of Rajasthan.

The Hon’ble High Court of Rajasthan reversed the concurrent findings of the statutory authorities and held that the property was commercial, applying a test based on whether the property was situated in an industrial area and whether the activity carried on there was exclusively manufacturing. Since manufactured goods were also being sold from the premises, the Hon’ble High Court of Rajasthan concluded that the property was commercial.

The Hon’ble Supreme Court rejected this approach and held that the test adopted by the Hon’ble High Court of Rajasthan was not supported by Circular No. 2/2004 issued by the Government of Rajasthan. The Court observed that the circular prescribed an industrial valuation based on the use of the land and not merely its classification under the Master Plan. Where, at the time of execution of the document, land was being put to industrial use, was situated in a RIICO Industrial Area or had been converted for industrial purposes, it was required to be valued at the industrial rate. The Hon’ble Court also held that the sale of manufactured goods was a necessary incident of manufacturing activity and that even retail sale from the premises would not make the property commercial.

Accordingly, the Hon’ble Supreme Court set aside the judgement of the Hon’ble High Court of Rajasthan and restored the orders of the statutory authorities treating the property as industrial for the purposes of stamp duty valuation. The Hon’ble Court, however, clarified that no refund would be available in respect of the excess stamp duty paid on the residential valuation, since the gift deed had voluntarily been executed and stamped on that basis. The appeal was accordingly allowed.