M/S Outdoor Advertising vs. State Of Karnataka

Held

The Court held that the petitioners had made out a case for the relief sought. It declared Section 103(b)(vi) and Section 134 of the Karnataka Municipal Corporations Act, 1976, which provide the power to levy tax on advertisements, as unconstitutional and void, striking them down. Consequently, the Court also declared the words "after the levy of the tax and that Section 134 has been determined by the Corporation" found in Sections 135(1), 135(2)(ii), 135(3), 139, and Schedule VIII to the Karnataka Municipal Corporations Act, 1976, along with the rules/bye-laws framed thereunder, as unconstitutional and void to that extent. Similarly, the Court struck down Section 94(1)(b)(xiii) (including explanation), Section 94(1-B), and related provisions in Sections 133(1), 132(2)(ii), 133(3), proviso (iv) to Section 142, Section 324(1)(ff), and Schedule VII to the Karnataka Municipalities Act, 1964, along with the rules framed by municipalities. The demand notices issued to the petitioner in WP No. 9936/2019 were quashed. The respondents were directed not to raise any demand for advertisement tax and not to take coercive action against the hoardings of the petitioners. For amounts collected after the 101st Amendment of the Constitution, the petitioners were given liberty to make representations for refund or adjustment against other levies, with a six-week timeline for authorities to respond.

Facts

These three writ petitions concerned the levy of advertisement tax by municipal bodies in Karnataka. WP No. 9936/2019 was filed by M/s. Raheel Communication challenging notices dated June 26, 2018, and October 3, 2018, issued by the Davangere Mahanagara Palike demanding payment of advertisement tax. WP No. 15016/2019 was filed by M/s. Outdoor Advertising Association Bangalore seeking a declaration that certain provisions of the Karnataka Municipal Corporations Act, 1976, and related rules/bye-laws are unconstitutional and void. WP No. 15691/2019 was filed by several advertising agencies challenging demands for advertisement tax and seeking directions to municipal authorities not to raise such demands or take coercive action. The core issue revolved around the constitutional validity of levying advertisement tax by municipal bodies after the omission of Entry 55 of List II of Schedule VII of the Constitution.

Key Issues

1. Whether Section 103(b)(vi), Section 134, and related provisions of the Karnataka Municipal Corporations Act, 1976, along with corresponding rules/bye-laws, are unconstitutional and void in light of the omission of Entry 55 of List II of Schedule VII to the Constitution of India? (Question of law) Petitioner's arguments: The petitioners contended that the omission of Entry 55 of List II of Schedule VII of the Constitution, which empowered the State Legislature to levy taxes on advertisements, rendered the provisions of the Karnataka Municipal Corporations Act, 1976, and the Karnataka Municipalities Act, 1964, enabling the levy of advertisement tax, unconstitutional and void. They argued that amendments made to the Panchayath Raj Act, omitting similar provisions, highlighted the anomaly of continuing such levies in corporations and municipalities. They also pointed to the absence of advertisement tax provisions in the newly enacted Bruhat Bengaluru Mahanagara Palike Act, 2020, as further evidence of legislative awareness. They relied on the omission of Entry 55 of List II of Schedule VII of the Constitution. Revenue/State's arguments: The respondents argued that the Karnataka Municipal Corporations Act, 1976 (Second Amendment) Act, 2021, sought to substitute "tax" with "fee" in certain provisions, suggesting that the declaration of unconstitutionality was unwarranted. They also referred to a letter dated May 12, 1970, indicating the State Government's consciousness of the need for amendments.