In this case, Coastal Gujarat Power Limited (CGPL) faced a similar situation. CGPL secured financing by a consortium of lenders for the construction of an ultra-mega-electric power plant in Gujarat and appointed one of the lenders, the State Bank of India (SBI), as a security trustee under a separate agreement on a security agent. CGPL had made a mortgage withdrawal in favour of SBI by paying the stamp duty capped under the law. However, the Chief Controlling Revenue Authority (CCRA) found that the stamp duty paid was insufficient and demanded that a total of 54,62,000 INRs be paid, the amount being confirmed by the Assistant Collector and confirmed in a “review request” filed by the CGPL. CGPL then opened proceedings before the Gujarat High Court. This decision is in fact contrary to the current practice of the Gujarat authorities to levy a multiple impact of stamp duty on a security document between a borrower and a security agent on the basis of the number of lenders represented by the title adductor, i.e. instead of paying a stamp on the value of the document, borrowers had to pay a multiple of the tax payable for each lender. Under this amendment, a number of officials from the Gujarat Tax Department and the Chancery began to say that when a security agent seizes a security document and the guarantee is in trust for the benefit of several lenders, the guarantee is actually created for the benefit of each lender and that the various separate business/transactions within the meaning of Section 5 of the Act would constitute. Although stamp duty is capped at a mortgage/mortgage/consignment agreement in Gujarat, stamp duty on these security documents has been increasingly paid as a multiple of the capped amount and number of lenders that the trustee would represent. This view had cost Gujarat the creation of guarantees, which was prohibitive in the case of union transactions with a large number of banks. The Gujarat Supreme Court held that when a mortgage is placed in favour of a trustee (the guarantee of several lenders), a mortgage should be treated as a single transaction (and not as an individual transaction, as limited by the state), regardless of whether such a trustee holds such a mortgage for the benefit of several lenders.
Accordingly, the Court held that such a mortgage deposit is a single instrument that relates to a single transaction and would therefore be subject to the tariff owed on a single mortgage and not a total duty to pay, as if there were several mortgages. In addition, Article 5 of the Act does not authorize the State to collect revenue from the entire transaction, as provided for outside the scope of the act concerned. Like all tax statues, stamp duty laws must be interpreted strictly according to a clear interpretation of the legislation and not on the basis of the state`s understanding of the legislature`s intent. For the issue against the bank guarantee in Gujarat, which is the stamp duty concerned.