2019 (2) TMI 1340 - HC - GST

Imposition of advertisement tax - Vires of the Mathura Vrindavan Nagar Nigam (Vigyapan Kar Ka Nirdharan and Wasuli Viniyaman) Upvidhi, 2017 - submission is that the aforesaid bye-laws were notified in the Official Gazette and were enforced w.e.f. 6.1.2018 but on the said date the Municipal Corporation had no authority in law to impose any advertisement tax - Held that - The Mathura Vrindavan Nagar Nigam framed the said bye-laws in exercise of its powers under Sub-Section (2) (h) of the Section 172 of the U.P. Municipal Corporation Act which enabled it to impose tax on advertisement not being advertisement published in the news papers. The aforesaid provision of Sub-Section (2)(h) of Section 172 of the U.P. Municipal Corporation Act was omitted vide Section 173 of the U.P. G.S.T. Act which was enforced w.e.f. 01.07.2017. It may be pertinent to note that not only the G.S.T. Act was implemented w.e.f. 01.07.2017 but even the provision of Section 173 thereof was enforced with effect from the said date. Thus, Section 172 (2) (h) of the U.P. Municipal Corporation Act stood omitted w.e.f. 01.07.2017. In view of the aforesaid omission of Section 172 (2) (h) of the U.P. Municipal Corporation Act by the U.P. G.S.T. Act, all Municipal Corporations in the State of U.P. were denuded of the power to impose tax on advertisement after 01.01.2017. Once the said power of imposing tax on advertisement itself was taken away, no bye-law in that regard could have been framed and promulgated. Apart from the above, the State legislature was invested with the power to make laws in respect of taxes on advertisement vide Entry 55 of List II to the 7th Schedule of the Constitution but the said Entry was deleted by the Constitution (101st Amendment) Act, 2016 w.e.f. 12.09.2016. The Mathura Vrindavan Nagar Nigam had no legislative competence on 6.01.2018 to promulgate the aforesaid bye-laws in view of omission of Section 172 (2) (h) of the U.P. Municipal Corporation Act by virtue of Section 173 of the U.P. G.S.T. Act which was enforced on 01.07.2017 as also due to the omission of Entry 55 of List II of 7th Schedule to the Constitution of India empowering the State to make bye-laws in respect of tax on advertisement vide Section 17 of the Constitution (101st Amendment) Act, 2016 enforced w.e.f. 16.09.2016. Thus, the Municipal Corporation on the relevant date lacked the necessary legislative competence to make and promulgate the said bye-laws - petition allowed.

Summary

Issues:
Challenge to vires of bye-laws on advertisement tax by advertising companies under U.P. Municipal Corporation Act, Central GST Act, U.P. GST Act, and Constitution of India.

Analysis:
The petitioners, advertising companies, contested the legality of Mathura Vrindavan Nagar Nigam's bye-laws on advertisement tax, citing them as ultra-vires to U.P. Municipal Corporation Act, Central GST Act, U.P. GST Act, and Articles 14 and 19 of the Constitution of India. They argued that the bye-laws were enforced without legal authority, as the provision enabling advertisement tax under Section 172 (2) (h) of the U.P. Municipal Corporation Act was deleted by the U.P. GST Act from 1.7.2017. Additionally, the State's power to legislate on advertisement tax under Entry 55 of List-II of the Constitution was removed by the Constitution (101st Amendment) Act 2016 from 12.9.2016 onwards, rendering the Municipal Corporation's imposition of advertisement tax invalid.

The High Court found that the omission of Section 172 (2) (h) of the U.P. Municipal Corporation Act by the U.P. GST Act on 1.7.2017 stripped all Municipal Corporations in U.P. of the authority to levy advertisement tax after 1.1.2017. Moreover, the deletion of Entry 55 of List II of the Constitution by the Constitution (101st Amendment) Act 2016 from 12.9.2016 onwards eliminated the State's power to make laws regarding advertisement tax. Consequently, the Municipal Corporations lost the ability to impose any tax on advertisement once the State was deprived of such legislative power.

Drawing from a previous judgment regarding similar bye-laws, the Court declared the Mathura Vrindavan Nagar Nigam's bye-laws on advertisement tax as ultra-vires. The Court emphasized that the Municipal Corporation lacked legislative competence on the relevant date to enact the bye-laws due to the absence of statutory authority post the legal amendments brought about by the U.P. GST Act and the Constitution (101st Amendment) Act 2016. Therefore, the Court struck down the bye-laws as ultra-vires and allowed the writ petition filed by the advertising companies, with no costs imposed.

In conclusion, the judgment highlighted the crucial legal principles of statutory authority for tax imposition, legislative competence, and the impact of constitutional amendments on the power to legislate. The decision reaffirmed the necessity for legal backing and competence in enacting tax-related bye-laws, ensuring adherence to the constitutional framework and statutory provisions.