Raheel Communication Vs Commissioner Mahanagara Palike (Karnataka High Court)
Conclusion: Consequent upon the 101st amendment to the Constitution certain taxes including the taxes and advertisement which were levied by the respective States and the Union were subsumed into goods and service tax. The authority to levy tax which was available under entry No.55 List II (State List) of the Seventh Schedule to the Constitution had been omitted. Consequently, the inferior corporate bodies of the State did not have power to levy and collect the tax on advertisement.
Held: Assessees were all carrying on the business inter alia outdoor advertisements involving erecting hoardings, after obtaining necessary permissions from the landlords and also local authorities and thereafter display advertisement of their clients on such hoardings. Assessees were required to pay advertisement tax in respect of the display of advertisements upon the demands that were raised by the respondent authorities. That in view of the amendment to the Constitution omitting entry No.55 in List II of Schedule VIII to the Constitution by its 101st amendment and consequent promulgation of Goods and Services Act, 2017 the States did not have authority to levy tax as was done prior to the constitutional amendment. However, despite the same the respondent authorities were continuing to raise demand for the payment of tax on advertisement without any authority constraining the petitioners to approach this court seeking reliefs as stated hereinabove. It was held that from the provisions under KMC Act, 1976 and KM Act, 1964 power had been entrusted to the Corporation to levy tax on advertisement and the power to determine the rate of tax had been vested with the Corporation and the Municipal Council respectively. Thus, hitherto power to levy and demand the tax on advertisement was traceable to the aforesaid provisions of the Acts. In turn the legislative competence of the State was traceable to entry No.55 of List II of Schedule VIII to the Constitution of India which conferred power on the State to make laws with respect to advertisement tax. The Parliament brought 101st amendment to the Constitution by way of constitution (one hundred and one first amendment) Act, 2016 by which entry No.55 of List II of Schedule VIII to the Constitution had been omitted. Consequently the State had no power to make any laws with respect to advertisement tax. On and after implementation of Goods and Service Tax Act, 2017 consequent upon the 101st amendment to the Constitution certain taxes including the taxes and advertisement which were levied by the respective States and the Union are subsumed into goods and service tax. The authority to levy tax which was available under entry No.55 List II (State List) of the Seventh Schedule to the Constitution had been omitted. Consequently, the Municipal Corporations and the Municipalities which were the inferior corporate bodies of the State did not have power to levy and collect the tax on advertisement.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Since the above three writ petitions raised common question with regard to validity of the demand made by respondent authorities for payment of advertisement tax in respect of hoardings erected by the petitioners, they are taken up for analogous hearing and common disposal.
2. In W.P.No.9936/2019 the petitioner has sought the following reliefs:
“i) Issue an appropriate Writ or order or direction by quashing the impugned notice No. SA.DAMAPA/KAMSHA/JAHI/33/2018-19/ & 24/18-19 respectively Dated: 26.06.2018 and 03.10.2018 to the petitioner directing him to pay certain amount issued by the Respondent vide Annexure -G & H respectively.
ii) Issue a Writ of Mandamus directing the respondents not to meddle with the hoardings of the petitioner”.
2.1 Petitioner in W.P.No.15016/2019 has sought for following reliefs:
a. Declare that Section 103(b) (vi), Section 134, the words “after the levy of the tax under Section 134 has been determined by the Corporation” in Section 135(1), Section(ii), Section 135(3), Section 139, and Schedule VIII to/of the Karnataka Municipal Corporation Act, 1976 along with the rules/bye-laws framed by Municipal Corporation in the State in pursuance of the said provisions are unconstitutional and void, and thereby strike them down;
b. Declare that Section 94(1)(b)(xiii) including the explanations thereto, Section 94(1-B), the words “after the levy of the tax under Section 94 has been determined by the Municipal Council” in Section 133(1), Section 133(2)(ii), Section 133(3), Proviso (iv) to Section 142, Section 324(1)(ff), and Schedule VII to/of the Karnataka Municipalities Act, 1964 along with the rules/bye-laws framed by Municipalities in the State in pursuance of the said provisions are unconstitutional and void, and thereby strike them down;
c. Declare that bodies under the Karnataka Municipal Corporation Act, 1976 Corporations Act, Karnataka Municipalities Act, 1964, and any other statutory/state bodies/authorities in the State of Karnataka have no authority to collect advertisement tax;
d. Issue a Writ of Mandamus or any other appropriate Writ directing the Respondents to ensure refund of all amounts collected by the authorities, corporations, municipalities under the Karnataka Municipal Corporations Act, 1976 Corporations Act, Karnataka Municipalities Act, 1964, and any other statutory/state bodies/authorities in pursuance of the said provisions in the state of Karnataka as advertisement tax to the members of the Petitioner”.
2.2 W.P.No.15691/2019 filed by the petitioners therein seeking following reliefs:
“i) Issue writ of Mandamus or any other appropriate writ directing the respondent Nos.1 to 5 not to raise any demand for payment of advertisement tax in respect of the hoardings erected by the petitioners within their limits.
ii) Direct the respondent Nos.1 to 5 not to take any coercive action against the hoardings erected by petitioners within the limits of respondent Nos.1 to 5 for non payment of advertisement tax”.
3. It is the common case of the petitioners in the above three writ petitions that they are all carrying on the business inter alia outdoor advertisements involving erecting hoardings, after obtaining necessary permissions from the landlords and also local authorities and thereafter display advertisement of their clients on such hoardings. Petitioners were required to pay advertisement tax in respect of the display of advertisements upon the demands that were raised by the respondent authorities. That in view of the amendment to the Constitution omitting entry No.55 in List II of Schedule VIII to the Constitution by its 101st amendment and consequent promulgation of Goods and Services Act, 2017 the States do not have authority to levy tax as was done prior to the constitutional amendment. However, despite the same the respondent authorities are continuing to raise demand for the payment of tax on advertisement without any authority constraining the petitioners to approach this court seeking reliefs as stated hereinabove.
4. It is the case of the petitioners that by way of constitution (one hundred and first amendment) Act, 2016, entry No.55 of List II of Schedule VIII to the Constitution which conferred power on the State to make law with respect to advertisement tax has been deleted and consequently States have no power to make any laws with respect to advertisement tax. Further advertisement tax has been subsumed into the Goods and Service tax due to the enactment of Central Goods and Services Tax Act, 2017 and Karnataka Goods and Services Tax, 2017. As such, statutory provisions providing for imposition of advertisement tax by the State and its authorities is unconstitutional and void. That despite the aforesaid amendment to the Constitution various corporations, municipalities who are arrayed as respondents in the aforesaid writ petitions are demanding payment of advertisement tax on a threat of removal of hoardings which is illegal and arbitrary constraining the petitioners to approach this court.
5. Heard Sri.Zameer Pasha, learned counsel for petitioner in W.P.9936/2019, Sri.C.K.Nandakumar, learned Senior counsel appearing for Sri.Arjun Rao for petitioner in W.P.No.15016/2019, Sri. T.Hareesh Bhandary, learned counsel for petitioners in W.P.No.15691/2019, Smt.M.C.Nagashree, learned AGA for respondent-State, Sri.Akshay B.M., learned counsel for respondent No.1 in W.P.No.9936/2019, Smt.Sumangala Gachinmath, learned counsel of respondent No.4, Smt.Sumana Baliga, learned counsel for respondent No.5, Sri. P.S.Malipatil, learned counsel for respondent No.6, Sri. K.N.Srinivas, learned counsel for respondent No.8, Sri.R.Subramanya, learned counsel for respondent No.9, Sri.Harish H.V., learned counsel for respondent No.12, Sri. A.V.Gangaharappa, learned counsel for respondent No.15, Sri.A.Ravishankar, learned counsel for respondent No.16, Sri.S.Mahesh, learned counsel for respondent No.18, Sri.A.Nagarajappa, learned counsel for respondent No.21, Sri.G.M.Ananda, learned counsel for respondent No.23, Smt.Geethadevi M.P., learned counsel for respondent No.25 in W.P.No.15016/2019, Sri.J.N.Naveen, learned counsel for respondent No.3, Sri.Ravi H.K., learned counsel for respondent No.4 and Sri.Vishwanath R. Hegde, learned counsel for respondent No.5 in W.P.No.15691/2019.
6. Sri. C.K.Nandakumar, learned Senior counsel apart from reiterating the grounds urged in the writ petition submitted that;
(a) the impugned provisions in the Karnataka Municipal Corporations Act, 1976 (KMC Act 1976) and Karnataka Municipalities Act, 1964(KM Act 1964) providing for imposition of tax on advertisement requires to be quashed as the same are unconstitutional and ultra vires the Constitution in view of 101st amendment to the Constitution.
(b) that the impugned provisions were enacted tracing their power to legislate which was available under entry No.55 of the List II in the 7th schedule of the Constitution which had conferred authority to legislate with regard to taxes on advertisement. That except the said power no other power or authority is available to the State to legislate on the matter of taxes on advertisement.
(c) that apart from implementation of Goods and Services Tax (GST) across the country, the 101st amendment to the Constitution was enacted with the Parliament which received President assent on 08.09.2016, and as per Section 17(b)(3) of the said amendment Act entry No.55 in List II has been omitted which has come into effect on and from 16.09.2016.
(d) that consequent to the aforesaid amendment the power to legislate on taxation on advertisements no longer exist with the State. However, the impugned provision continue to exist on the Statute Book which are being used and misused by the authorities demanding payment of tax on advertisement.
e) though consequent to the constitutional 101st amendment, the State has brought necessary amendment to Karnataka Gram Swaraj and Panchayat Raj Act on 12.07.2017 by deleting Section 199(3)(c) of the said Act under which tax on advertisement was being imposed, however no amendment has been made to the impugned provisions. This has led to a situation where advertisement tax are being imposed only in the areas falling under the limits of Corporations and Municipalities and not in the panchayat areas thereby violating provisions of Article 14 of the Constitution.
(f) that the Additional Chief Secretary, Finance Department had addressed a letter dated 12.05.2017 to the Additional Chief Secretary, Urban Development Department requesting suitable amendment be made in the KMC and KM Act in view of constitutional amendment. However no action in this regard is taken.
(g) that there being no power to enact legislation imposing advertisement tax, continuation of impugned provisions on the statute book is without authority and runs contrary to the provisions of Article 265 of the Constitution which mandates that no tax shall be levied or collected except by a mandate of law.
(h) the petitioners are suffering double taxation upon implementation of GST as well as the demand being made by the respondent authorities on the basis of the impugned provisions which have become unconstitutional.
(i) The petitioners are therefore before this court seeking the aforesaid reliefs. Learned Senior counsel relies upon the following statutes and authorities in support of the aforesaid submissions:
The Goods and Services Tax (Compensation to States) Act, 2017
2. Koluthara Exports Ltd., Vs. State of Kerala and others- (2002) 2 Supreme Court Cases 459
3. New Delhi Municipal Council Vs. State of Punjab and others- (1997)7 Supreme Court Cases 339
4. Yadlapati Venkateswarlu Vs. State of Andhra Pradesh and Anr- 1992 supp (1) Supreme Court Cases 74
5. Sunderam Shetty and others Vs State of Karnataka and others, Karnataka High Court Judgment dated 04.08.2021 in Writ Petition No.4601/2020
6. Mafatlal Industries Ltd. and others Vs Union of India and others – (1997)5 SCC 536.
7. On the other hand, learned AGA has filed a memo dated 21.10.2021 along with copy of the notification dated 07.10.2011 whereby the Government of Karnataka has enacted the Karnataka Municipalities and certain other laws (amendment Act) 2021 and a notification dated 07.10.2021 in this regard has been published in the official Gazette. The said amendment Act is intending to substitute the word “tax” with that of the word “fee” where ever found in the impugned provisions contained in the Karnataka Municipalities Act, 1964 and Karnataka Municipal Corporations Act, 1976. Thus, it is submitted that the present petitions does not survive for consideration.
8. Sri.Akshay B.M., learned counsel appearing for respondent in W.P.No.9936/2019 resisting the aforesaid writ petition and the relief sought therein contended that what is being demanded and charged by the respondent authorities is “fees” for the service being rendered by the respondent authorities and not “tax” as contended by the petitioners. Learned counsel for respondent relies upon the following authorities/judgments in support of his submissions:
(1) Municipal Corporation of Delhi and others Vs Mohd. Yasin – AIR 1983 SC 617.
(2) Union of India (UOI) and others Vs State of UP -AIR 2008 SC 521.
9. Sri. Gangadharappa, learned counsel appearing for one of the respondent-authorities submits that the petitioners have entered into contract with the respondent authorities and in terms of the contract they are liable to pay tax. Once having agreed to pay the tax they cannot contend to the contrary. That the petitioners are therefore estopped from refusing to pay the tax.
10. Heard the learned counsel for the parties and perused the records.
11. The points that arise for consideration are as under:
(i) Whether the respondent authorities are justified in issuing demand notices calling upon the petitioners to pay the tax on advertisement?
(ii) Whether the impugned provisions namely Section 103(b)(vi), 134 containing the words “after levy of tax under Section 134 has been determined by the Corporation” and in Sections 135(1), 135(2)(ii), 135(3), 139 and Schedule (viii) to the Municipal Corporations Act, 1976 along with bye laws framed by Municipal Corporation pursuant to the aforesaid provisions are unconstitutional and ultra vires the Constitution and require to be quashed?
(iii) Whether impugned provisions namely Section 94(1)(b)(xiii) including the explanation thereto, Section 94(1-B) containing the words “after the levy of tax under Section 94 has been determined by Municipal council” in Sections 133(1), 133(2)(ii), 133(3), proviso (iv) to Section 142, Section 324(1)(ff) and Schedule 7 to the Karnataka Municipalities Act, 1964 along with rules/bye laws framed by Municipalities in the State pursuant to the said provisions are unconstitutional and ultra vires the constitution and require to be quashed?
12. Before adverting to the submissions and counter submissions made by the learned counsel for petitioners and respondents it is appropriate to refer the impugned provisions. The relevant provisions under Karnataka Municipal Corporations Act, 1976 which are impugned are as under:
Section 103(b)(iv)
“103. Taxes which may be imposed:-Subject to the general or special orders of Government, a corporation shall,
a) XXX
b) [at rates not exceeding those specified in this Act] levy any one or more of the following taxes:
i) xxx
ii) xxxx
iii) xxxx
iv) xxxx
v) xxx
vi) a tax on advertisement
Section 134
“134 Tax on advertisement.- Every person who erects, exhibits, fixes or retains, upon or over any land, building, wall or structure any advertisement or who displays any advertisement to public view in any manner whatsoever, in any place whether public or private, shall pay on every advertisement which is so erected, exhibited, fixed, retained or displayed to public view, a tax calculated at such rates and in such manner and subject to such exemptions, as the corporation may, with the approval of the Government, by resolution determine: Provided always that the rates shall be subject to the maxima and minima laid down by the Government in this behalf:
Provided further that no tax shall be levied under this section on any advertisement or a notice,-
(a) of a public meeting, or corporation of the city, or
(b) of an election to any legislative body, or
(c) of a candidature in respect of such an election: Provided also that no such tax shall be levied on any advertisement which is not a sky-sign and which,-
(d) is exhibited within the window of any building; or
(e) relates to the trade or business carried on within the land or building upon or over which such advertisement is exhibited, or to any sale or letting of such land or building or any effects therein or to any sale, entertainment or meeting to be held upon or in such land or building; or
(f) relates to the name of the land or building, upon or over which the advertisement is exhibited, or to the name of the owner or occupier of such land or building; or
(g) relates to the business of any railways; or
(h) is exhibited within any railway station or upon any wall or other property of a railway except any portion of the surface of such wall or property fronting any street”.
Section 135(1)
“135. Prohibition of advertisements without written permission of Commissioner.- (1) No advertisement shall, after the levy of the tax under section 134 has been determined upon by the corporation, be erected, exhibited, fixed or retained upon or over any land, building, wall, hoarding or structure within the city or shall be displayed in any manner whatsoever in any place without the written permission of the Commissioner”.
Section 135(2)(ii)
“(2) The Commissioner shall not grant such permission if,-
(ii) the tax, if any, due in respect of the advertisement has not been paid”.
Section 135(3)
“3) Subject to the provisions of sub-section (2), in the case of an advertisement liable to the advertisement tax, the Commissioner shall grant permission for the period to which the payment of the tax relates and no fee shall be charged in respect of such permission:
Provided that the provisions of this section shall not apply to any advertisement erected, exhibited, fixed or retained on the premises of a railway relating to the business of a railway”.
Section 139
139. Collection of tax on advertisement.-The Commissioner may form out the collection of any tax on advertisement leviable under section 134 for any period not exceeding one year at a time on such terms and conditions as may be provided for in the bye-laws.
SCHEDULE VIII
(See section 103)
TAX ON ADVERTISEMENTS
