Municipal corporation's advertisement tax demands post-GST implementation declared illegal under Section 173 UP GST Act

The Allahabad HC dismissed an application seeking clarification on advertisement tax collection by Kanpur Nagar Nigam post-GST implementation. The court held that municipal corporation's demands for advertisement tax after July 1, 2017 were illegal under Section 173 of U.P. GST Act read with the 101st Constitutional Amendment. The court quashed demands falling within the prohibited period and directed refund of any advertisement tax deposited by petitioners for the period beyond April 1, 2017. The clarification application was dismissed as the original order was sufficiently clear.

---

---

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered in this judgment is whether the Kanpur Nagar Nigam has the authority to levy and collect advertisement tax or fees after the legislative changes brought by the U.P. Goods and Services Tax (GST) Act, 2017 and the Constitution (101st Amendment) Act, 2016. Specifically, the Court examined:

• Whether the demand notices issued by the Kanpur Nagar Nigam for advertisement tax were lawful following the deletion of the power to levy such taxes.
• Whether the amounts collected by the Nagar Nigam were in the nature of advertisement tax or advertisement fees, and consequently, whether such amounts should be refunded to the petitioners.
• The implications of the previous court orders and interim arrangements on the current demands and collections by the Nagar Nigam.

ISSUE-WISE DETAILED ANALYSIS

1. Authority to Levy Advertisement Tax Post-GST Implementation

Relevant Legal Framework and Precedents: The authority to levy advertisement tax was originally contained in Section 172(2)(h) of the Municipal Corporation Act, 1916. This provision was deleted by Section 173 of the U.P. GST Act effective from July 1, 2017. Additionally, the power of the State Government to legislate on advertisement tax under Entry 55 of List II of the VII Schedule of the Constitution was removed by the Constitution (101st Amendment) Act, 2016.

Court's Interpretation and Reasoning: The Court noted that after the legislative changes, neither the State Government nor the Nagar Nigam had the authority to impose or collect advertisement tax. The Court emphasized that any tax collection must be backed by statutory authority as mandated by Article 265 of the Constitution of India.

Application of Law to Facts: The Court applied these legal principles to conclude that the Nagar Nigam's demand for advertisement tax post-July 1, 2017, was illegal and without jurisdiction.

2. Nature of Amounts Collected: Tax vs. Fees

Key Evidence and Findings: The Kanpur Nagar Nigam argued that the amounts collected were not advertisement taxes but advertisement fees for the use of land for hoardings. The petitioners contested this, asserting that the amounts were collected as taxes.

Treatment of Competing Arguments: The Court examined the demand notices and previous orders to determine the nature of the amounts collected. It found that the notices and the Court's previous order clearly referred to the amounts as advertisement tax.

Conclusions: The Court concluded that the amounts collected were indeed advertisement taxes and not fees, as argued by the Nagar Nigam. Consequently, any amount collected as advertisement tax after July 1, 2017, must be refunded to the petitioners.

SIGNIFICANT HOLDINGS

Core Principles Established: The judgment reinforces the principle that no tax shall be levied or collected without statutory authority, as per Article 265 of the Constitution of India. It also clarifies that legislative changes under the GST framework and constitutional amendments have removed the authority to levy advertisement tax from municipal bodies.

Final Determinations on Each Issue: The Court held that the Kanpur Nagar Nigam's demands for advertisement tax post-July 1, 2017, were illegal. It ordered that any such taxes collected must be refunded. The Court dismissed the clarification application, affirming that the original order was clear and required no further clarification.

---