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Section 39: Collector's power to refund penalty paid under section 38, sub-section (1)

Indian Stamp Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1899
Section 38 All 78 Sections Schedule I (Arts 1–65) Section 40

Legal Commentary & Landmark Judgments: Section 39

Section 39 of the Indian Stamp Act, 1899 vests discretionary authority in the Collector to refund, in whole or in part, the tenfold penalty paid in respect of an impounded instrument under Section 35, where the Collector determines that the penalty was excessive or should not have been imposed.

  • Discretionary Power to Refund Excessive Penalties: When an instrument has been impounded by a civil court and admitted on payment of duty plus the mandatory tenfold penalty under Section 35, the Collector possesses statutory power under Section 39(1) to refund the whole or any part of the penalty if he considers it excessive or unjustified.
  • Mandatory One-Year Limitation Period: Under Section 39(2), an application for refund of penalty must be made in writing within one year from the date of payment of the penalty, establishing a strict statutory limitation that cannot be extended.
  • Bona Fide Omission Standard: Refunds are routinely granted where the deficiency arose out of genuine legal ambiguity, bona fide mistake of law, or lack of fraudulent intention to evade stamp duty.
Key Landmark Precedents:
  • Trustees of H.C. Dhanda Trust v. State of M.P. (2020) 9 SCC 510: The Supreme Court observed that the scheme of the Stamp Act, including Section 39, clearly indicates that the imposition of a tenfold penalty by a court under Section 35 is not absolute or irreversible, and the Collector has statutory jurisdiction to mitigate excessive penalties upon finding lack of contumacious conduct.
  • Chilakuri Gangulappa v. Rohini (2004) 4 SCC 747: The Supreme Court discussed the statutory procedure under Sections 35, 38, 39, and 40, affirming that when a court levies a tenfold penalty under Section 35, the aggrieved party has the statutory remedy of applying to the Collector under Section 39 for remission and refund of the excessive penalty.
Courtroom Practice & Strategic Litigation Guidance:

If forced during trial to pay the mandatory tenfold penalty under Section 35 to secure the urgent admission of a vital document in evidence, immediately track the court's remittance of the duty and penalty to the Collector under Section 38(1). Within one year of payment, file a detailed application under Section 39 demonstrating absence of fraudulent intent to secure a substantial or full refund of the penalty.

Section 38 All 78 Sections Schedule I (Arts 1–65) Section 40