M/S Pankaj Advertising Prop. Through Its Prop. vs. State Of U.P. And 7 Others

Held

The Court held that the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015, was ultra-vires and without legislative or statutory competence. The reasoning was twofold: Firstly, Section 128(2)(vii) of the U.P. Municipalities Act, 1916, which empowered municipalities to impose advertisement tax, was omitted by Section 173 of the U.P. Goods and Service Tax Act, 2017, effective from July 1, 2017. Since the bye-laws were notified on August 19, 2017, after this omission, the municipality lacked the statutory power to impose the tax. Secondly, Entry 55 of List II of the Seventh Schedule of the Constitution, which empowered the State Legislature to legislate on taxes on advertisements, was omitted by the Constitution (101st Amendment) Act, 2016, effective from September 16, 2016. This divestment of the State's power also meant municipalities could not impose such taxes. Consequently, the bye-laws were struck down. The Court directed the Nagar Palika Parishad, Hathras, to refund all amounts collected from the petitioner under these bye-laws within three months.

Facts

The petitioner, M/s Pankaj Advertising Prop., challenged the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015, which sought to recover advertisement tax on hoardings affixed to private properties. The petitioner argued that the bye-laws were ultra-vires the Uttar Pradesh Goods and Service Tax Act, 2017, the U.P. Municipalities Act, 1916, and various constitutional provisions. The Nagar Palika Parishad framed these bye-laws on January 12, 2017, and they were published on August 19, 2017. Previous judgments had held that municipalities lacked the authority to impose advertisement tax. The U.P. Municipalities Act, 1916, was amended in 2011 to include Section 128(2)(vii), empowering municipalities to impose advertisement tax, but this was later omitted by the U.P. Goods and Service Tax Act, 2017.

Key Issues

1. Whether the Nagar Palika Parishad Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015, is ultra-vires the provisions of the Uttar Pradesh Goods and Service Tax Act, 2017, and the U.P. Municipalities Act, 1916, and consequently, Article 265 of the Constitution of India? Petitioner's arguments: The petitioner contended that the bye-laws were without legislative competence. They argued that the omission of Section 128(2)(vii) of the U.P. Municipalities Act, 1916, by the U.P. Goods and Service Tax Act, 2017, effective from July 1, 2017, divested the municipality of the power to levy advertisement tax. Furthermore, the omission of Entry 55 of List II (State List) of the Seventh Schedule to the Constitution of India by the Constitution (101st Amendment) Act, 2016, effective from September 16, 2016, removed the State Legislature's power to legislate on taxes on advertisements. Therefore, the bye-laws, notified on August 19, 2017, were enacted without the necessary legal authority. Respondent's arguments: The State Government, through the Additional Advocate General, stated they had nothing to add unless there was a challenge to the levy of Advertisement Tax under the U.P. GST. The Nagar Palika Parishad's counsel appeared but no specific arguments were recorded in their favor.