2016 (8) TMI 1460 - HC - Indian Laws

Demand of Advertisement tax - petitioner was granted concession to design, build and maintain bus shelters at different places, which were to be transferred to the Company free of charge after expiry of the concession period - Section 90(1)(d) of the Punjab Municipal Corporation Act, 1976. HELD THAT - In the case in hand, the Company which entered into the concession agreement with the petitioner is a company in which the Corporation itself holds majority shares. It had granted permission for display of advertisements. Initially, the letter was sent to the petitioner requiring it to pay the advertisement tax from the date of agreement within 7 working days and also furnish the details of advertisements displayed and the location thereof. The aforesaid letter is stated to be 5.1.2015. As the document has been placed on record, it was not signed by any one. It was replied to by the petitioner vide letter dated 13.1.2015, to which the Assistant Commissioner(s), Municipal Corporation, Ludhiana, vide letter dated 22.1.2015 responded by stating that it was the duty of the petitioner to pay advertisement tax as per the agreement and in case of failure, proceedings for removal of the advertisements and also for terminating the contract shall be initiated. In the case in hand, the Municipal Corporation issued notice for deposit of tax on advertisement. Such a notice cannot be said to be authorised, if read in consonance with the provisions of Sections, 123, 126 and 135 of the Act. As has already been noticed, in case there is violation by any person in erecting or displaying any advertisement, the only power conferred on the Commissioner is either to get it removed or remove the same. Even though Section 135 of the Act envisages issuance of a demand notice for recovery of the advertisement tax due on a prescribed form, however, no form, as such, was referred to. There is no procedure prescribed in the Act or the Rules regarding filing of returns, assessment of tax and consequently recovery thereof. The order, which has been impugned in the present petition, has not been passed in exercise of powers conferred under any of the provisions of the Act, Rules or by-laws framed thereunder, but it was in pursuance to the directions issued by this court for disposal of the legal notice got issued by the petitioner. Thus, the manner in which the demand of tax on advertisement has been raised from the petitioner cannot be legally sustained, hence, the same is set aside - petition allowed.

Summary

Issues Involved:
1. Quashing of the advertisement tax demand order.
2. Legality of the advertisement tax demand.
3. Compliance with the procedural requirements under the Punjab Municipal Corporation Act, 1976.
4. Applicability of the Punjab Municipal Outdoor Advertisement Policy, 2012.
5. Delay in issuing the tax demand notice.
6. Absence of machinery provisions for assessment and collection of tax.
7. Appeal and recovery provisions under the Act.

Issue-wise Detailed Analysis:

1. Quashing of the advertisement tax demand order:
The petitioner sought quashing of the order dated 22.1.2016, passed by the Commissioner, Municipal Corporation, Ludhiana, demanding advertisement tax amounting to ? 41,77,500/-. The petitioner contended that the demand was illegal and without proper assessment or procedural compliance.

2. Legality of the advertisement tax demand:
The petitioner argued that Section 90 of the Punjab Municipal Corporation Act, 1976, provides for the imposition of taxes, including advertisement tax. However, the assessment and collection must be in accordance with the Act and bye-laws, which were not framed. The absence of such bye-laws rendered the tax demand illegal and confiscatory.

3. Compliance with the procedural requirements under the Punjab Municipal Corporation Act, 1976:
The petitioner emphasized that Section 122 of the Act specifies the conditions for tax on advertisements, including advance payment and the manner as determined by bye-laws. However, no bye-laws were framed, and the tax demand was issued without following the prescribed procedure, violating Article 265 of the Constitution of India.

4. Applicability of the Punjab Municipal Outdoor Advertisement Policy, 2012:
The petitioner referred to the Punjab Municipal Outdoor Advertisement Policy, 2012, which provides provisions regarding advertisements and safeguards but does not prescribe the procedure for tax assessment and collection. The policy's provisions were not sufficient to validate the tax demand.

5. Delay in issuing the tax demand notice:
The petitioner argued that the notice for demanding tax for the year 2008 onwards was issued in 2015, which was time-barred. The petitioner relied on the judgment in State of Punjab and others v. Bhatinda District Coop. Milk P. Union Ltd., (2007) 11 SCC 363, to support the argument that the assessment should be framed within a reasonable time.

6. Absence of machinery provisions for assessment and collection of tax:
The petitioner contended that the absence of machinery provisions for assessment and collection of tax rendered the demand illegal. The Supreme Court's judgments in Kunnathat Thathunni Moopil Nair v. State of Kerala, AIR 1961 SC 552; State of A. P. v. Nalla Raja Reddy, AIR 1967 SC 1458; and Commissioner, Central Excise and Customs, Kerala v. M/s Larsen & Toubro Ltd., AIR 2015 SC 3600, were cited to support this argument.

7. Appeal and recovery provisions under the Act:
The respondents argued that Section 122 of the Act defines the person liable to pay tax and the taxable event. The rate of tax was specified by the Government through notifications dated 17.5.2005 and 15.12.2014. The Act provides a complete machinery for levy, assessment, demand notice, recovery, and penalty. The respondents relied on the judgment in Brij Mohan Gupta v. State of Haryana, 2015(4) RCR (Civil) 318, to support their argument.

Judgment:
The court examined the relevant provisions of the Punjab Municipal Corporation Act, 1976, and noted that the Act enables the Corporation to levy tax on advertisements, but the assessment and collection must be in accordance with the Act and bye-laws, which were not framed. The court referred to various judgments of the Supreme Court, emphasizing the importance of machinery provisions for assessment and collection of taxes. The court concluded that in the absence of such provisions, the demand for advertisement tax from the petitioner could not be legally sustained. Consequently, the impugned order dated 22.1.2016 was quashed, but the competent authority was not debarred from raising a demand against the petitioner if permissible by law following the prescribed procedure. The petition was disposed of accordingly.