Advertisers Welfare Association vs. The State Of Bihar

Facts

The Advertisers Welfare Association, representing advertisers in Muzaffarpur, filed a writ petition challenging a letter dated September 27, 2018, issued by the Town Commissioner of Muzaffarpur Municipal Corporation. This letter prescribed rates of tax for advertisements. The petitioner argued that this levy was contrary to the Bihar Goods and Services Tax Act, 2017, and the Constitution of India, particularly after the omission of entry 55 from the State List. They also contended that without rules or regulations under the Bihar Municipal Act, 2007, the Corporation lacked the competence to levy such taxes. The State's initial response was to shift responsibility to the Municipal Corporation, and they failed to file a supplementary counter-affidavit despite a prior adjournment.

Held

The Court quashed the letter no. 1716 dated 27.09.2018 issued by the Municipal Commissioner, Muzaffarpur Municipal Corporation, finding its contents to be vague and leaving advertisers in the dark regarding the basis of license fee collection. The Court acknowledged the petitioner's argument regarding legislative competence post-GST. However, with the consent of the parties, the Court directed the Muzaffarpur Municipal Corporation to prepare terms and conditions in line with Section 146 of the Bihar Municipal Act, 2007, within eight weeks to maintain clarity on license fee demands. These terms and conditions, along with the demand, are to be communicated to individual advertisers. The Corporation was also directed to simultaneously take steps for drafting regulations. The Court noted that the Municipal Corporation had suffered financial loss due to its own inaction in not establishing clear terms and conditions or regulations. Aggrieved parties retain the liberty to challenge the new terms and conditions. The petitioner undertook not to erect any fresh hoarding/structure until the Corporation issues its terms and conditions.

Key Issues

1. Whether the letter no. 1717 dated 27.09.2018, prescribing advertisement tax rates, is contrary to the Bihar Goods and Services Tax Act, 2017, and the Constitution of India? (Petitioner's contention: Yes, the levy is beyond the legislative competence of the respondents post-GST implementation and the constitutional amendment. Revenue/State's contention: Not explicitly recorded, but impliedly defended the Corporation's action). 2. Whether the respondents have the legislative competence to levy, demand, and recover tax on advertisements after the omission of entry no. 55 from the State List in Schedule VII of the Constitution of India, effective September 16, 2016? (Petitioner's contention: No, the legislative competence shifted to the GST regime. Revenue/State's contention: Not explicitly recorded). 3. Can the respondents levy, demand, and recover any tax upon outdoor advertisements in the absence of rules or regulations framed under the Bihar Municipal Act, 2007? (Petitioner's contention: No, any levy requires the authority of law, which includes proper rules and regulations. Revenue/State's contention: Not explicitly recorded, but the Corporation argued that in the absence of regulations, terms and conditions could be prepared under Section 146 of the Bihar Municipal Act, 2007).