2019 (2) TMI 426 - HC - GST

Court invalidates Advertisement Tax imposed by Nagar Palika Parishad Hathras due to lack of statutory competence

M/s Pankaj Advertising Prop. Through Its Prop. Versus State of U.P. And 7 Others

The Court held that the Nagar Palika Parishad Hathras lacked statutory competence to impose Advertisement Tax after the omission of relevant provisions by ... Legislative competence to the imposition, collection and realization of the Advertisement Tax - Constitutional validity of Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 - Uttar Pradesh Goods and Service Tax Act, 2017 - U.P. Municipalities Act, 1916 - Articles 14, 19, 21, 246, Seventh Schedule, List-II. Whether the bye-laws framed on 12.1.2017 by the respondents and published on 19.8.2017, were beyond the statutory power of the municipalities? Held that:- This Court has no hesitation in holding that after the omission of Entry-55 of the List-II of the Seventh Schedule to the Constitution of India having been omitted by the 101 Amendment Act, 2016 with effect from 16.9.2016, even the State Government did not have the legislative competence to levy or collect taxes on advertisement which was earlier available under Entry-55, this coupled with the fact that the power of taxation earlier vested with the municipalities under section 128(2)(vii) of the U.P. Municipalities Act, 1916 having been omitted by virtue of Section 173 of the U.P. Goods and Service Tax Act, 2017, the municipality did not even have the statutory competence to levy, impose or collect Advertisement Tax. The levy and collection of the Advertisement Tax under the provisions of Nagar Palika Parishad, Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 is clearly without legislative or statutory competence and is ultra-vires under Article 265 of the Constitution of India, U.P. Municipalities Act, 1916 and U.P. Goods and Service Tax Act, 2017. This Court has no hesitation in holding that the said Nagar Palika Parishad, Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 is without any legislative or statutory competence and, thus, are hereby struck down - the Court has held the levy and collection of Advertisement Tax as ultra-vires, the amounts so collected from the petitioner are liable to be refunded. Petition allowed. Issues Involved:1. Legislative competence of Nagar Palika Parishad Hathras to impose Advertisement Tax.2. Validity of Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 under constitutional and statutory provisions.3. Impact of the 101st Constitutional Amendment Act, 2016 and the U.P. Goods and Service Tax Act, 2017 on the power to levy Advertisement Tax.Issue-wise Detailed Analysis:1. Legislative Competence of Nagar Palika Parishad Hathras to Impose Advertisement Tax:The petitioner challenged the legislative competence of Nagar Palika Parishad Hathras to impose Advertisement Tax under the U.P. Municipalities Act, 1916. The petitioner argued that there was no provision in the Act that authorized the imposition of such a tax, and hence, the municipality lacked the power to frame any bye-laws in that regard. The Court noted that the power to levy Advertisement Tax was initially granted to municipalities under Section 128(2)(vii) of the U.P. Municipalities Act, 1916, which was introduced by U.P. Act No. 8 of 2011. However, this provision was omitted by Section 173 of the U.P. Goods and Service Tax Act, 2017, effective from 01.07.2017. Therefore, the municipality did not have the statutory competence to levy, impose, or collect Advertisement Tax after this date.2. Validity of Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015:The petitioner sought to declare the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 as ultra-vires of the provisions of the U.P. Goods and Service Tax Act, 2017, U.P. Municipalities Act, 1916, and various Articles of the Constitution of India. The Court examined the legal history and noted that similar attempts to levy Advertisement Tax by municipalities had been declared illegal and void in previous judgments. The Court held that after the omission of Section 128(2)(vii) by the U.P. Goods and Service Tax Act, 2017, the municipality lacked the statutory competence to levy Advertisement Tax. Consequently, the bye-laws framed on 12.01.2017 and published on 19.08.2017 were beyond the statutory power of the municipalities and were declared ultra-vires under Article 265 of the Constitution of India, U.P. Municipalities Act, 1916, and U.P. Goods and Service Tax Act, 2017.3. Impact of the 101st Constitutional Amendment Act, 2016 and the U.P. Goods and Service Tax Act, 2017 on the Power to Levy Advertisement Tax:The Court analyzed the impact of the 101st Constitutional Amendment Act, 2016, which came into effect on 08.04.2016. This amendment inserted Article 265(A) and omitted Entry-55 of List-II (State List) of the Seventh Schedule to the Constitution, which previously provided for taxes on advertisements. The U.P. Goods and Service Tax Act, 2017, which came into operation on 01.07.2017, further omitted Section 128(2)(vii) of the U.P. Municipalities Act, 1916. The Court concluded that after these amendments, the State Government and municipalities no longer had the legislative competence to levy or collect Advertisement Tax. The bye-laws framed by the Nagar Palika Parishad Hathras were thus declared ultra-vires and without legislative or statutory competence.Conclusion:The Court held that the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 was without any legislative or statutory competence and was struck down. The amounts collected from the petitioner under the said bye-laws were ordered to be refunded within three months. The writ petition was allowed, and no order as to costs was made.Separate Judgment Delivered:In concurrence with the conclusion, another judge added that the Nagar Palika Parishad Hathras framed the bye-laws under Sub-Section (2)(vii) of Section 128 of the Municipalities Act, which was omitted by the U.P. Goods and Service Tax Act, 2017. The bye-laws, notified on 19.08.2017, were beyond legislative competence as the statutory provision enabling the imposition of Advertisement Tax was deleted by then. The deletion of Entry 55 of List II of the Seventh Schedule by the 101st Constitutional Amendment Act, 2016, also denuded the State of the power to make laws in respect of taxes on advertisements. Thus, the bye-laws were struck down as ultra-vires.