M/S Selvel Media Services Private Limited And 11 Others vs. State Of U.P. And 4 Others

Held

The Court held that the Nagar Nigam, Kanpur, ceased to have any jurisdiction to impose and realize tax on advertisement after September 12, 2016, and more specifically after July 1, 2017. The Court reasoned that the deletion of Section 172(2)(h) of the Municipal Corporation Act, 1916, by Section 173 of the U.P. GST Act, effective July 1, 2017, extinguished the statutory power to levy advertisement tax. Furthermore, the deletion of the State Government's legislative power concerning advertisement tax under Entry 55 of List II of the VII Schedule of the Constitution, effective September 12, 2016, meant there was no longer any legislative authority to enact laws for imposing such tax. The Court emphasized that Article 265 of the Constitution requires taxes to be levied only by the authority of law, and in this case, the authority was absent. Therefore, the demand for advertisement tax from the petitioners after July 1, 2017, was deemed illegal and without jurisdiction. The notices of demand were quashed to the extent they pertained to the period after July 1, 2017, and any tax deposited by the petitioners for this period was ordered to be refunded. The Court also directed that the Nagar Nigam shall not realize any tax on advertisement after July 1, 2017.

Facts

The petitioners, M/s Selvel Media Services Private Limited and 11 others, are advertising companies challenging the demand of advertisement tax imposed by the Nagar Nigam, Kanpur. They argue that the tax is illegal from July 1, 2017, onwards, as the provision for levying advertisement tax was deleted and the U.P. Goods and Services Tax, 2017 came into force. Previously, the Nagar Nigam's rules for advertisement tax were struck down by the Allahabad High Court. Despite subsequent bye-laws also being struck down and no further rules being enacted, the Nagar Nigam continued to raise demands for advertisement tax. The power to levy this tax was previously under Section 172(2)(h) of the Municipal Corporation Act, 1916, which was deleted effective July 1, 2017, by Section 173 of the U.P. GST Act. Furthermore, the State Government's legislative power under Entry 55 of List II of the VII Schedule of the Constitution was deleted effective September 12, 2016, by the Constitution (101 Amendment) Act, 2016.

Key Issues

1. Whether the Nagar Nigam, Kanpur, has the legal authority to levy and collect advertisement tax after September 12, 2016, and specifically after July 1, 2017, in light of the deletion of the relevant legislative provisions and the implementation of the U.P. GST Act, 2017? Petitioner's Arguments: The petitioners contended that the deletion of Section 172(2)(h) of the Municipal Corporation Act, 1916, by Section 173 of the U.P. GST Act, 2017, effective July 1, 2017, removed the statutory basis for levying advertisement tax. They also highlighted that the State Government's power to legislate on advertisement tax under Entry 55 of List II of the VII Schedule of the Constitution was deleted effective September 12, 2016, by the Constitution (101 Amendment) Act, 2016. Consequently, no law exists to authorize the imposition or collection of such tax. They relied on Article 265 of the Constitution, which mandates that taxes can only be levied by the authority of law. Respondent's Arguments: The judgment records no specific arguments made by the respondent (State of U.P. and Kanpur Nagar Nigam).