Constitutionality of state laws imposing Advertisement Tax challenged in Karnataka HC
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Constitutionality of state laws imposing Advertisement Tax challenged in Karnataka HC

Meera Emmanuel

The constitutionality of state laws allowing the imposition of advertisement tax in Karnataka by municipal and corporation authorities has been challenged in the Karnataka High Court.

On Friday, Justice S Sunil Dutt Yadav passed an interim order in the matter restraining the state from taking any coercive action for non-payment of advertisement tax until June, when it will take up the matter next. The order applies to all demands made for such tax after the commencement of the 101st amendment to the Constitution of India.

The writ petition filed by Outdoor Advertising Association through Advocates Arjun Rao and Maitreyi Bhat highlights that following the 101st Constitutional Amendment, state authorities no longer have the power to legislate in the field of taxes for advertisements. 

Prior to this amendment, the state authorities had derived the power to impose such tax from Entry 55, List II of the VII Schedule of the Constitution. However, following the amendment, this entry has been deleted.

Moreover, it is pointed out that in 2017, advertisement tax was subsumed into the Goods and Services Tax due to the enactment of the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax, 2017.

Nevertheless, the petitioner highlights that state authorities have repeatedly coerced the payment of advertisement tax under provisions of the Karnataka Municipal Corporations Act, 1976 and Karnataka Municipalities Act, 1964. Provisions allowing the same under both laws are yet to be repealed. As noted in the petition,

The said [state] authorities are … demanding payment of advertisement tax on the threat of removal of advertisements and hoardings, non-renewal of permissions, etc. While the outdoor media owners have responded to these notices stating that after the introduction of GST, advertisement tax is no longer leviable by the said authorities, they apprehend that their hoardings will be removed for non-payment of the wrongly-demanded advertisement tax… 

… the Petitioner and its members continue to face coercive action at the hands of the said authorities ostensibly in terms of provisions which are ex facie unconstitutional.

Outdoor advertisers have been forced to make payment of GST, as well as advertisement tax to the said authorities under protest and various hoardings, have been removed for non-payment of advertisement tax to the said authorities. The financial impact arising from the unlawful tax demands on the advertisers has been immense and the removal of hoardings has had incalculable financial consequences.”

In this backdrop, the petitioner has contended that Article 19 (1) (g) of the Constitution has been violated.

The petitioner goes on to point out that following the 101st Constitutional amendment, Karnataka’s Panchayat laws have been duly amended to delete provisions concerning the imposition of advertisement tax. In effect, this tax is being imposed only in areas other than Panchayat areas in Karnataka. It is contended that this constitutes an Article 14 violation.

Before the High Court, the state contended that although the word “tax” has been used in the state acts, the amount collected is in the nature of a licence fee.

All the same, the Court opined that the matter required further consideration. Therefore, it issued an interim order restraining the state from taking any coercive action with respect to demands for payment of advertisement tax until the next date of hearing.

The main prayers made by the petitioner before the High Court are as follows:

  • That provisions allowing the imposition of advertisement tax by state authorities despite the 101st Constitutional amendment be struck down. In this regard Sections 103 (b)(iv), 134, 135, 139 and Schedule VIII of the Karnataka Municipal Corporations Act, 1976 and Sections 94 (I)(b)(xiii), 133, 142, 324 and Schedule VII of the Karnataka Municipalities Act, 1964 have been pinpointed.
  • That the High Court issue a declaration that bodies under the Karnataka municipal and corporation authorities and other state authorities have no authority to collect advertisement tax;
  • That the High Court direct the refund of all amounts collected by the authorities as advertisement tax following the commencement of the 101st Constitutional amendment.

The matter has been posted to be taken up next on June 10.

Read the Order:

Karnataka-Advertisement-Tax-interim-order.pdf
Preview

Read the Petition:

KarHC-Advertising-Tax-WP-2.pdf
Preview
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