Goods and Services Tax

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

2019 (2) TMI 426 – ALLAHABAD HIGH COURT – TMI – 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 earl

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from the petitioner are liable to be refunded.

Petition allowed.
– Writ Tax No. – 577 of 2018 Dated:- 8-2-2019 – Pankaj Mithal And Pankaj Bhatia JJ. For the Petitioner : C.K.Parekh,Vikas Rastogi For the Respondent : C.S.C.,Sahab Tiwari, Saurabh Tiwari ORDER (Delivered by Hon'ble Pankaj Bhatia,J.) Heard Sri C.K. Parekh, learned counsel for the petitioner, Sri Avinash Chandra Tripathi, learned Standing Counsel and Sri Sahab Tiwari, learned counsel appearing for Nagar Palika Parishad, Hathras, (respondent nos. 2, 3 and 4). The present writ petition has been filed seeking to declare the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 as ultra-vires of the provisions of Uttar Pradesh Goods and Service Tax Act, 2017; U.P. Municipalities Act, 1916 and Articles 14, 19, 21, 246, Seventh Schedule, List-II (State List – Entry-55 which has been amended and omitted by 101 Amendment w.e.f. 16.9.2016) and 265 of the Constitution of India. Thi

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was sought to be recovered from the petitioner. The petitioner therefore challenged the legislative competence to the imposition, collection and realization of the Advertisement Tax under the U.P. Municipalities Act, 1916 alleging that when there is no provision to impose such a tax there can be no power to frame any bye-laws in that regard. The issue relating to the power of the municipality to levy and collect Advertisement Tax has a chequered history. Prior to 2011, the municipalities in exercise of their powers under the U.P. Municipality Act 1916 sought to levy and recover Advertisement Tax, which was challenged before the High Court, Allahabad by means of Writ Petition No. 7848 of 2010 (M/B) Bharti Airtel Limited through its Authorised Signature vs. State of U.P. And others, the said petition came to be decided on 21.10.2010 wherein the Hon'ble Court held that the Nagar Palika Parishad and Nagar Panchayat have no authority to impose tax on the Hoardings/Sign Boards/Glow Signs

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eviable on such buildings as are situated within a distance, to be fixed by rules in this behalf for each municipality from the rearest sewer line; (iv) a conservancy tax for the collection, removal and disposal of excrementious and polluted matter from privies, urinals, cesspools; (2) In addition to the taxes specified in sub-section (1), the Municipality may, for the purposes of this Act and subject to the provisions thereof, impose any of the following taxes, namely :- (i) a tax on trades and callings carried on within the municipal limits and deriving special advantages from, or imposing special burdens on, the municipal services; (ii) a tax on trades, callings and vocations including all employments remunerated by salary or fees; (iii) a theatre tax which means a tax of amusements or entertainments; (iv) a tax on dogs kept within the Municipality; (v) a scavenging tax; (vi) a tax on deeds of transfer of immovable properties situated within the limits of the Municipality; (vii) a t

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by legislative competence in view of the Entry-55 of the State List-II of the Seventh Schedule to the Constitution of India. The U.P. Municipal Corporation Rules were framed under U.P. Municipal Corporation Act which provided for the procedure for levy and collection of the Advertisement Tax. The said rules came up for consideration before the Full Bench in the case of Anurag Bansal vs. State of U.P. And Others, which was decided on 24.4.2011 wherein the said rules were held to be ultra vires, the provision of the Act as same were made without following the procedure laid down under the Act. In a similar manner, bye-laws framed by the Nagar Nigam, Lucknow, Nagar Nigam, Allahabad and Nagar Nigam, Bareilly were challenged and were declared as illegal, void and inoperative vide judgement of this Court in the case of Pepsico India Holdings (Pvt.) Ltd. vs. State of U.P. And others, 2015 (1) ADJ 273, decided on 08.1.2015. The bye-laws framed by Kanpur Nagar Nigam were also challenged and de

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s been omitted with effect from 16.9.2016. In pursuance of the 101 Amendment U.P. Goods and Service Tax 2017 (Act No. 1 of 2017) came into operation with effect from 01.7.2017. Section 17 of the 101 Constitutional Amendment Act is quoted as under: 17. Amendment of Seventh Schedule – In the Seventh Schedule to the Constitution,- (a) in List I – Union List,- (i) for entry 84, the following entry shall be substituted, namely:- "84. Duties of excise on the following goods manufactured or produced in India, namely:- (a)petroleum crude; (b) high speed diesel; (c) motor spirit (commonly known as petrol); (d) natural gas; (e) aviation turbine fuel; and (f) tobacco and tobacco products."; (ii) entries 92 and 92C shall be omitted; (b) in List II-State List,- (i) entry 52 shall be omitted; (ii) for entry 54, the following entry shall be substituted, namely:- "54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation

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Sections 192, 193 shall be omitted. (ii) In the Uttar Pradesh Municipalities Act, 1916 clause (7) of sub-section (2) of Section 128 shall be omitted. (iii) In the Uttar Pradesh Taxation and Land revenue Laws Act, 1975, Chapter II shall be omitted. Admittedly, the bye-laws by virtue of which the municipalities intended to levy and collect tax on advertisement were framed on 12.1.2017, however, the same were published on 19.8.2017 i.e. after 01.07.2017 when the U.P. Goods and Service Tax Act, 2017 came into being and after the omission of Section 128(2) sub-section (vii) of the U.P. Municipalities Act. That being the case, the narrow ground to be considered by this Court is 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. Learned counsel for the Municipality tried to justify the levy on the ground that the bye-laws have been framed by virtue of directions issued by the Director on 30.5.2014 dir

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dvertisement 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. In view of the fact that 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. Accordingly, the Nagar Palika Parishad, Hathras is directed to refund all the amounts that it may have collected from the petitioner under the said Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 within a period of

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icipalities Act which enabled the municipality to impose tax on advertisement not being advertisement published in the news papers. The aforesaid provision of Sub-Section (2)(vii) of the Section 128 of the Municipalities Act was omitted vide Section 173 of the G.S.T. Act which was enforced w.e.f. 01.07.2017. It may be pertinent to note that not only the G.S.T. Act was implemented w.e.f. 01.07.2017 but even the provision of Section 173 thereof was enforced with effect from the said date. Thus, Section 128(2)(vii) of the Municipalities Act stood omitted w.e.f. 01.07.2017. In view of the aforesaid omission of Section 128(2)(vii) of the Municipalities Act by the G.S.T. Act, all municipalities in the State of U.P. were denuded of the power to impose tax on advertisement after 01.01.2017. Once the said power of imposing tax on advertisement itself was taken away, no bye10 laws in that regard could have been framed and promulgated. The aforesaid bye laws were formulated by the Nagar Palika Pa

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islature was invested with the power to make laws in respect of taxes on advertisement vide Entry 55 of List II to the 7th Schedule of the Constitution but the said Entry was deleted by the Constitution (101st Amendment) Act, 2016 w.e.f. 12.09.2016. The said Amending Act vide Section 17 amends 7th Schedule and provides for the omission of Entry 55 of List 2 of the said Schedule. Thus, deleting the power of the State to make laws in respect of taxes on advertisement. Accordingly, when the State was denuded of the power to make laws in respect of tax on advertisement obviously the municipalities also were divested of power to impose any tax on advertisement. In view of the aforesaid, the impugned bye-laws are also ultra vires to Article 265 and List II of 7th Schedule of Constitution of India. In short, the Nagar Palika Parishad had no legislative competence on 19.08.2017 to promulgate the aforesaid byelaws in view of omission of Section 128(2)(vii) of the Municipalities Act by virtue of

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