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TMI Blog2023 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... cil 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? HELD THAT:- As could be seen from the provisions under KMC Act, 1976 and KM Act, 1964 power has been entrusted to the Corporation to levy tax on advertisement and the power to determine the rate of tax has 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 has been omitted. Consequently the State has no power to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State Government to the Panchayath Raj Act has, as contended by the petitioner has lead to anomaly wherein the tax on advertisement is being levied and collected within the limits of Municipal corporation and Municipalities while no such levy is being made within the limits of Panchayaths. This Court is of the considered view that the petitioner has made out a case for grant of relief as sought for - Petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ndamus 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners 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 1. Pankaj Advertising Vs State of UP - Allahabad High Court Judgment dated 08.02.2019 in Writ Tax No.577/2018 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. Mr.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sl.No. Particulars Maximum No.amount of tax per annum (in Rupees) 1 2 3 1 Non-illuminated advertisement on land, building, wall, hoardings, frame, post, structure, etc,- (a) For a space upto 1 sq.m. 50 (b) For a space over 1 sq.m. and upto to 2.5. sq.m. 80 (c) For every additional 2.5 sq.m. or less 80 2 2. Non-illuminated advertisement carried on vehicles drawn by bullocks, horses or other animals, human beings, cycle or any other device carried on any vehicle,- (a) For a space up to 5 sq.m. 300 (b) For every addition 5 .sq.m. or less 300 3 Illuminated advertisement boards carried on vehicles (a) For a space upto 5.sq.m 375 (b) For every addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newspapers) erected, exhibited, fixed or retained upon or over any land, building, wall, hoarding, frame, post or structure or upon or in any vehicle or displayed to public view in any manner whatsoever visible from a public street or public place (including any advertisement exhibited by means of cinematograph): Explanation 1.-The word "structure" in this sub-clause includes any movable board on wheels used as an advertisement or an advertisement medium; Explanation 2.-'public place' for the purpose of this sub-clause, means any place which is open to the use and enjoyment of the public, whether it is actually used or enjoyed by the public or not; Explanation 3.-The word "advertisement" in this sub-clause means any word, letter, model, sign, placard, notice, device or representation, whether illuminated or not, in the nature of, and employed wholly or in part for the purpose of, advertisement, announcement or direction". Section 94(1-B) "94(1-B) No tax shall be levied on any advertisement which,- (a) is exhibited with the window of any building if the advertisement relates to the trade, profession or business carried on in that building; or (b) relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this Act, over any land, building or structure or upon or in any vehicle or for displaying in any other manner". SCHEDULE VII (Section 94) TAX ON ADVERTISEMENTS. Sl.No. Particulars Maximum amount of tax per annum Rs. 1 Non-illuminated advertisements on land, building, wall, hoardings, frame, post, structures, etc.- (a) For a space up to 1 sq.m. 10 (b) For a space over 1 sq.m. and up to 2.5 sq. m. 16 (c) For every additional 2.5 sq. m. or less. 16 2 Non-illuminated advertisements carried on vehicles, drawn by bullocks, horses, or other animals, human beings, cycle or any other device carried on any vehicle,- (a) For a space up to 5 sq. m. 60 (b) For every additional 5 sq. m. or less 60 3 Illuminated advertisement boards carried on vehicles,- (a) For a space up to 5 sq. m. 75 (b) For every additional 1 sq. m. or less 15 4 Non-illuminated advertisement boards, carried by sandwich boardmen,- (a) For each board not exceeding 1 sq. m. 15 (b) For each board exceeding 1 sq. m. and up to 2.5 sq. m. 30 (c) For each additional 1 sq. m. in area or less 15 5. Illuminated advertisement boards carried by sandwich boardmen,- (a) For each board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 has been omitted. Consequently the State has no power to make any laws with respect to advertisement tax. 16. It is also relevant to note that Parliament enacted "the Goods and Services Tax (Compensation to States) Act, 2017", to provide for compensation to the States for loss of revenue arising on account of implementation of Goods and Services Act in pursuance of the provisions of Constitution(one hundred and first amendment) Act, 2016. Section 5 of the said Act reads as under: "5. (1) Subject to provisions of subsection (2)(3)(4)(5) and (6) the base year revenue for a State shall be the sum of revenue collected by the State and the Local bodies during the base year, on account of taxes levied by the respective State or Union and net refunds, with respect to the following taxes, imposed by the respective State and Union, which are subsumed into goods and services tax namely: (a) …… (b)….. (c)….. (d)….. (e) The tax on advertisement and/or any other tax levied by the concerned Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or enacting the impugned provisions with reference to the provisions in part IV of the Constitution; the Legislative competency must be demonstrated with reference to one or more of the entries in List II and III of the Seventh Schedule of the Constitution. ……" 20. In the case of New Delhi Municipal Corporation vs. State of Punjab and others reported in (1997) 7 SCC 339. The Nine Judge Bench of the Apex Court dealing with power to levy tax by the Municipalities at paragraphs 97, 98 and 99 has held as under; "97. We have great difficulty in accepting this assertion. Article 265 of the Constitution emphatically mandates that " no tax shall be levied or collected except by authority of law". Under the framework of the Constitution there are two principal bodies which have been vested with plenary powers to make laws, these being the Union Legislature, which is described by Article 79 as "Parliament for the Union" and the State Legislatures, which are described by Article 168 in the singular as "Legislature of a State". While certain other bodies have been vested with legislative power, including the power of levying taxes by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution permits to the municipal council, an agent of the State Government, and the municipality cannot refuse to raise taxes as directed. The proper authority to determine what should and what should not constitute a public burden is the Legislature of the State. This is not only true for the State itself but it is also true in respect of each municipality of the State; these inferior corporate bodies having only such authority in this regard as the legislature shall confer upon them. A statute will not be declared unconstitutional unless it is specifically challenged and the principle is equally applicable to an enactment authorising levy of a tax for a public purpose. The power to tax is a sovereign power and is legislative in character and it has to be exercised within the Constitutional limitations. The statutes relating to municipal taxes may be changed according to the existing legislative rules of State policy unless forbidden by the Constitution from doing so. Irregular assessment may also be regularised with retrospective effect within the same Constitutional limitations. Where the Court has not already declared invalid a taxing measure which was of doubtful val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of taxpayers whereas a fee is a payment for services rendered, benefit provided or privilege conferred'. Compulsion is not the hallmark of the distinction between a tax and a fee. That the money collected does not go into a separate fund but goes into the consolidated fund does not also necessarily make a levy a tax. Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere causal relation may be enough. Further, neither the incidence of the fee nor the service rendered need be uniform. That others besides those paying the fees are also benefited does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest. Nor is the Court to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services rendered etc., against the amount of fees collected so as to evenly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on the property of the Railways". 26. Thus, learned counsel for the respondent No.1 relying upon the aforesaid judgment submit that the levy is `fee' and not `tax', therefore, there is no need or requirement of declaring the impugned provisions as unconstitutional and void. 27. Learned AGA referring to the notification dated 07.10.2021 giving effect to the Karnataka Municipalities and certain other law (Second Amendment) Act, 2021 wherein, words "following taxes" "tax" is sought to be substituted with insertion of words "or fee", submits that in view of the aforesaid Act, 2021 the declaration that the impugned provisions are unconstitutional is unwarranted. 28. At this juncture, it is relevant also to refer to letter dated 12.05.1970 issued by the Additional Chief Secretary, Finance Department addressed to Additional Chief Secretary produced at Annexure-K to the W.P.No.15016/2019 requesting suitable amendment to be made in Karnataka Municipal Corporation Act and the Karnataka municipalities act in view of omission of entry 55 of List II of Schedule VIII to the Constitution. The contention of the said letter would reveal that in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les /Bye laws framed by the Municipal Corporations in the State pursuant to the said provision is also declared unconstitutional and void and the same to the said extent are struck down. (iv) Similarly, Section 94(1)(b) (xiii) including explanation thereto, Section 94(1-B) and the words "after the levy of tax under Section 94 has been determined by the Municipal Council "in Section 133(1), Section 132(2)(ii), Section 133(3) proviso (iv) to Section 142 , Section 324(1)(ff) and Schedule VII to the Karnataka Municipalities Act, 1964 along with rules framed by the Municipalities in the State pursuant to the said provisions are declared unconstitutional and to that extent are struck down. (v) Demand made at Annexures-G and H dated 26.06.2018 and 03.10.2018 raised against the petitioners in W.P.No.9936/2019 for payment of amount towards the advertisement tax are quashed. (vi) Consequently, Gratuity the relief sought in W.P.No.15691/2019, the respondents-authorities are directed not to raise any demand for payment of advertisement taxes in respect of the hoardings erected by the petitioners and also not to take any coercive actions in respect of the hoardings erected by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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