TaxTMI 
TaxTMI 
2023 (1) TMI 2
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....ADVOCATE FOR R14 & R19; SRI. A.V. GANGADHARAPPA, ADVOCATE FOR R15; SRI. A. RAVISHANKAR, ADVOCATE FOR R16; SRI. S. MAHESH, ADVOCATE FOR R18; SRI. A. NAGARAJAPPA, ADVOCATE FOR R21; SRI. G.M. ANANDA, ADVOCATE FOR R23; SRI. GEETHADEVI M.P., ADVOCATE FOR R25; R7, R10, R11, R13, R17, R20, R22, R24, R26 SERVED) (BY SRI. A.V. ANGADHARAPPA, ADVOCATE FOR R1; SRI. J.N. NAVEEN, ADVOCATE FOR R3; SRI. RAVI. H.K., ADVOCATE FOR R4; SRI. VISHWANATH R. HEGDE, ADVOCATE FOR R5; SMT. M.C. NAGASHREE, AGA FOR R6; R2-SERVED) ORDER Since the above three writ petitions raised common question with regard to validity of the demand made by respondent authorities for payment of advertisement tax in respect of hoardings erected by the petitioners, they are taken up for analogous hearing and common disposal. 2. In W.P.No.9936/2019 the petitioner has sought the following reliefs: "i) Issue an appropriate Writ or order or direction by quashing the impugned notice No. SA.DAMAPA/KAMSHA/JAHI/33/2018-19/ & 24/18-19 respectively Dated: 26.06.2018 and 03.10.2018 to the petitioner directing him to pay certain amount issued by the Respondent vide Annexure -G & H respectively. ii) Issue a Writ of ....
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....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 also local authorities and thereafter display advertisement of their clients on such hoardings. Petitioners were required to pay advertisement tax in respect of the display of advertisements upon the demands that were raised by the respondent authorities. That in view of the amendment to the Constitution omitting entry No.55 in List II of Schedule VIII to the Constitution by its 101st amendment and consequent promulgation of Goods and Services Act, 2017 the States do not have authority to levy tax as was done prior to the constitutional amendment. However, despite the same the respondent authorities are continuing to raise demand for the payment of tax on advertisement without any authority constraining the petitioners to approach this court seeking reliefs as stated hereinabove. 4. It is the case of the petitioners that by way of constitution (one hundred and first amendment) Act, 2016, entry No.55 of List II of Schedule VIII to the Consti....
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....64) 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 to legislate which was available under entry No.55 of the List II in the 7th schedule of the Constitution which had conferred authority to legislate with regard to taxes on advertisement. That except the said power no other power or authority is available to the State to legislate on the matter of taxes on advertisement. (c) that apart from implementation of Goods and Services Tax (GST) across the country, the 101st amendment to the Constitution was enacted with the Parliament which received President assent on 08.09.2016, and as per Section 17(b)(3) of the said amendment Act entry No.55 in List II has been omitted which has come into effect on and from 16.09.2016. (d) that consequent to the aforesaid amendment the power to legislate on taxation on advertisements no longer exist with the State. However, the impugned provision continue to exist on the Statute Book which are being used and misused by the a....
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....rs 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 in the official Gazette. The said amendment Act is intending to substitute the word "tax" with that of the word "fee" where ever found in the impugned provisions contained in the Karnataka Municipalities Act, 1964 and Karnataka Municipal Corporations Act, 1976. Thus, it is submitted that the present petitions does not survive for consideration. 8. Sri.Akshay B.M., learned counsel appearing for respondent in W.P.No.9936/2019 resisting the aforesaid writ petition and the relief sought therein contended that what is being demanded and charged by the respondent authorities is "fees" for the service being rendered by the respondent authorities and not "tax" as contended by the petitioners. Learned counsel for respondent relies upon the following authorities/judgments in support of his submissions: (1) Municipal Corp....
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.... 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 is so erected, exhibited, fixed, retained or displayed to public view, a tax calculated at such rates and in such manner and subject to such exemptions, as the corporation may, with the approval of the Government, by resolution determine: Provided always that the rates shall be subject to the maxima and minima laid down by the Government in this behalf: Provided further that no tax shall be levied under this section on any advertisement or a notice,- (a) of a public meeting, or corporation of the city, or (b) of an election to any legislative body, or (c) of a candidature in respect of such an election: Provided also that no such tax shall be levied on any advertisement which is not a sky-sign and which,- (a) is exhibited....
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....l, 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 additional 1.sq.m. or 75 4 Non-illuminated advertisement boards, carried by switch boardmen,- (a) For each board not exceeding 1 75 (b) For each board exceeding 1 sq.m. and upto 2.5. sq.m 150 (c) For each additional 1 sq.m. in area or less 75 5 Illuminated advertisement boards carried by switch boardmen,- (a) For each board not exceeding 1 150 (b) For each board exceeding 1 sq.m. and upto 2.5 sq.m. 250 (c) For each additional 1 sq.m. in area 150 6 Illuminated advertisements on land, building, wall or hoardings, frame....
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....udes 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 trade, profession or business carried on within the land or building upon or over which such advertisement is exhibited or to sale or letting of such land or building or any effects therein or any sale, entertainment or meeting to be held on or upon or in, the same; or (c) relates to the name of the land or building, upon or ....
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....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 not exceeding 1 sq. m. 30 (b) For each board exceeding 1 sq. m. and up to 2....
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....ment 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 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 advertiseme....
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....k of legislative competence, the State cannot claim legitimacy for 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 ....
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.... from the State Legislature which could delegate that power in the manner 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 ha....
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....om these precedents? We learn that there is no generic difference between 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 servic....
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....rters. It is in the nature of a fee for service rendered and not any tax 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 t....
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....to the Municipal Corporation Act, 1976 and the Rules /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....