2019 (5) TMI 728 - HC - GST

Demand of advertisement tax imposed by the Nagar Nigam, Kanpur on displaying advertisement through hording within its jurisdiction - transition to GST regime - HELD THAT - The power to levy advertisement tax was contained in Section 172 (2) (h) of the Municipal Corporation Act, 1916 which stood deleted w.e.f. 1.7.2017 by virtue of Section 173 of U.P. GST Act - In addition to the above, even the power of the State Government to legislate regarding advertisement tax as provided under Entry 55 of List II of the VII Schedule of the Constitution of India also stood deleted w.e.f. 12.9.2016 by the Constitution (101 Amendment) Act, 2016. Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by the authority of law. Therefore, the authority to levy any tax much less the advertisement tax must be derived from the Statutes. Since the provision of Section 2 (h) of Section 172 of the Municipal Corporation Act was omitted vide Section 173 of the U.P. GST Act w.e.f. 1.7.2017 and even the power of the State legislature to legislate with regard to advertisement tax stood deleted w.e.f. 12.9.2016, there is neither any power left with the State Government or the Municipal Corporation to legislate about the imposition of tax on advertisement - after 12.9.2016 or from 1.7.2017 the Nagar Nigam, Kanpur ceased to have any jurisdiction to impose and realize tax on advertisement. Accordingly, the demand of tax on advertisement from the petitioners after 1.7.2017 is held to be illegal and without jurisdiction. The Nagar Nigam, Kanpur shall not realize any tax on advertisement after 1.7.2017 - petition allowed.

Summary

Issues: Challenge to advertisement tax imposed by Nagar Nigam, Kanpur post 1.7.2017 due to deletion of relevant provisions and enactment of U.P. Goods and Service Tax, 2017.

Analysis:
The petitioners, advertising companies, contested the demand of advertisement tax levied by Nagar Nigam, Kanpur after 1.7.2017, following the deletion of provisions enabling such taxation. The Municipal Corporation Act, 1916 previously empowered Nagar Nigam to impose advertisement tax, but this authority was nullified by the U.P. GST Act on 1.7.2017. Furthermore, the State Government's legislative power regarding advertisement tax was also abolished as of 12.9.2016. The Constitution of India mandates that taxes must be levied based on statutory authority, and with the removal of relevant provisions, neither the State Government nor the Municipal Corporation had the jurisdiction to legislate or impose tax on advertisements post the specified dates.

Consequently, the High Court determined that Nagar Nigam, Kanpur lacked the authority to levy or collect advertisement tax after 1.7.2017. The court held the demand for tax on advertisements from the petitioners post this date as illegal and without jurisdiction. The impugned demand notices were quashed, and any tax amount paid by the petitioners for the period post 1.7.2017 was directed to be refunded. The judgment allowed the writ petition, prohibiting Nagar Nigam, Kanpur from realizing any advertisement tax post 1.7.2017.