2017 (10) TMI 1642 - HC - Indian Laws

Court Upholds Indore Municipal Corp Ad Tax on Signage, Cites Procedural Flaws; Future Compliance Required Per 1978 Byelaws.

The court upheld the imposition of advertisement tax by the Indore Municipal Corporation on glow-sign boards and neon signs, affirming their ... Advertisement tax - validity of bye laws - quasi judicial procedure for assessment and recovery - recovery of tax by private contractor under Section 189 A - prohibition on coercive recovery by contractor - liability of signboards, neon boards and display boards as advertisementsAdvertisement tax - validity of bye laws - Validity of imposition of advertisement tax by Indore Municipal Corporation and of the 1976/1978 bye laws framed for assessment and collection - HELD THAT: - The Court accepted the Division Bench's conclusion that the Corporation is empowered under Section 132(6)(l) of the Madhya Pradesh Municipal Corporation Act, 1956 to impose an advertisement tax and that the Indore Municipal Corporation framed bye laws under Sections 427/430 which were published and came into force in 1978. Once confirmed and published, the bye laws form part of the statutory scheme and the Corporation must act in accordance with them. The Division Bench upheld the general validity of the imposition and the bye laws and this Court found no ground to take a different view.The imposition of advertisement tax and the bye laws for assessment and collection are valid and not liable to be quashed as a whole.Quasi judicial procedure for assessment and recovery - advertisement tax - Necessity of quasi judicial procedure for levy/assessment and availability of prescribed remedies before recovery - HELD THAT: - The Court followed the Division Bench finding that assessment and levy of advertisement tax require quasi judicial procedure - for example, issuance of bills, opportunity to file objections and appellate remedy - either under Sections 173/174 where no bye laws exist or under the procedure provided by valid bye laws. The Division Bench held that where bye laws exist they govern assessment/collection; where bye laws were not complied with, the procedural safeguards (bill, objections, hearing, appellate remedy) are indispensable and must be observed before recovery is enforced.Assessment and recovery must follow quasi judicial safeguards as provided by the Act and bye laws; failure to follow such procedure vitiates the demand.Recovery of tax by private contractor under Section 189 A - prohibition on coercive recovery by contractor - Permissible scope of leasing recovery to a private contractor and limits on contractor's powers - HELD THAT: - The Court endorsed the Division Bench's conclusion that Section 189 A permits the Corporation to lease out the recovery of taxes by auction or contract, and that mode of collection by auction is not per se prohibited. However, the power delegated to a private contractor is limited to recovery of amounts lawfully levied and determined by the Corporation; the contractor cannot perform the sovereign functions of levy or assessment nor exercise coercive powers (such as attachment and sale) which are statutory powers of the Corporation/competent authority. Any coercive action taken by the contractor is unauthorized.The Corporation may lease recovery to a contractor but assessment and coercive recovery powers cannot be exercised by the contractor; coercive recovery by the contractor is impermissible.Quasi judicial procedure for assessment and recovery - recovery of tax by private contractor under Section 189 A - Validity of demands raised and requirement for re examination where procedural steps were not followed - HELD THAT: - Applying the Division Bench reasoning, the Court found that in the present matters the Municipal Corporation had not followed the procedure prescribed in the bye laws (application in Form 'A', intimation of tax payable, consideration and formal order in Form 'B') before directing the contractor to recover the amounts. Consequently the demands raised by the contractor were quashed and the Corporation was directed to re examine and issue fresh demands in accordance with the bye laws and statutory procedure; only after such formal determination may the contractor be authorised to recover amounts (subject to the limits stated).Existing demands quashed; municipal authority to re determine demands afresh in accordance with bye laws and only thereafter the contractor may recover amounts, without exercising coercive powers.Liability of signboards, neon boards and display boards as advertisements - advertisement tax - Whether neon signs, glow signs, name boards and similar display boards are liable to advertisement tax - HELD THAT: - The Court adopted the Division Bench's treatment that neon boards, sign boards and display boards displayed at premises (including dealer/retailer premises) fall within the ambit of 'advertisement' for levy of advertisement tax under the statute and bye laws. The contention that shop nameplates or product names displayed by an establishment proprietor are not advertisements was considered and rejected in light of the Division Bench's conclusions.Neon/glow signs, signboards and display boards are chargeable to advertisement tax under the Act and bye laws.Final Conclusion: The writ petition is dismissed on the basis of the Division Bench precedent: the imposition of advertisement tax and the 1978 bye laws are valid; Section 189 A permits leasing recovery but does not empower the contractor to assess or to exercise coercive recovery; because the Municipal Corporation did not follow the bye laws' procedural steps the impugned demands are quashed and the Corporation is directed to re determine and issue fresh demands in accordance with the bye laws, after which recovery may be effected by the contractor subject to the statutory limits. Issues Involved:1. Imposition of advertisement tax by Indore Municipal Corporation.2. Validity of resolutions and work orders related to advertisement tax.3. Authority of private contractors to collect advertisement tax.4. Procedural requirements for imposing and collecting advertisement tax.5. Classification of glow-sign boards and neon signs as advertisements.6. Compliance with the Madhya Pradesh Municipal Corporation Act, 1956 and related byelaws.Issue-wise Detailed Analysis:1. Imposition of Advertisement Tax by Indore Municipal Corporation:The petitioner challenged the imposition of advertisement tax by the Indore Municipal Corporation on glow signs and neon signs displayed by dealers, distributors, and retailers. The court upheld the imposition of the tax, referencing Section 132(6)(l) of the Madhya Pradesh Municipal Corporation Act, 1956, which empowers the Corporation to levy a tax on advertisements other than those published in newspapers.2. Validity of Resolutions and Work Orders Related to Advertisement Tax:The petitioner contested the validity of Resolution No.167 dated 24.08.2011 and Resolution No.233 dated 13.10.2011, along with the work order dated 20.10.2011 issued to M/s. Shauryaditya Advertise for the collection of advertisement tax. The court found no grounds to quash these resolutions and work orders, stating that they were in accordance with the statutory provisions and byelaws.3. Authority of Private Contractors to Collect Advertisement Tax:The court examined whether the Municipal Corporation could delegate the collection of advertisement tax to a private contractor. It was held that while Section 189-A of the Act of 1956 permits leasing out the recovery of taxes, the assessment and levy must still be conducted by the Municipal Corporation. The contractor is authorized to collect the tax but cannot take coercive action for recovery, which remains the responsibility of the Municipal Corporation.4. Procedural Requirements for Imposing and Collecting Advertisement Tax:The court emphasized that the procedural requirements under the Byelaws of 1978 must be followed. This includes issuing a bill, allowing objections, and providing a quasi-judicial process for assessment and collection. The court found that the Municipal Corporation had not followed these procedures, leading to the quashing of the demand notices issued by the contractor. The Municipal Corporation was directed to reissue demands following the correct procedure.5. Classification of Glow-Sign Boards and Neon Signs as Advertisements:The court addressed the argument that glow-sign boards and neon signs are not advertisements but merely name boards. It was determined that these signs fall under the definition of advertisements as per the Act and Byelaws, and thus, are subject to advertisement tax.6. Compliance with the Madhya Pradesh Municipal Corporation Act, 1956 and Related Byelaws:The court found that the Municipal Corporation must comply with the Act of 1956 and the Byelaws of 1978 when imposing and collecting advertisement tax. This includes the need for a quasi-judicial process for assessment and the prohibition of coercive recovery actions by private contractors.Conclusion:The court upheld the imposition of advertisement tax by the Indore Municipal Corporation but quashed the demand notices due to procedural non-compliance. The Municipal Corporation was directed to follow the prescribed procedures under the Byelaws of 1978 for future assessments and collections. The authority of private contractors to collect tax was affirmed, but their ability to take coercive action was restricted. The classification of glow-sign boards and neon signs as advertisements was confirmed, subjecting them to the advertisement tax.