Freedom of Speech: Supreme Court stays Bom HC judgment permitting stamp duty on advertisements

Freedom of Speech: Supreme Court stays Bom HC judgment permitting stamp duty on advertisements

Murali Krishnan

In what could be another keenly watched litigation, the Supreme Court will decide whether a levy of stamp duty on advertisements on mass media is violative of Freedom of Speech and Expression guaranteed by the Constitution.

In an appeal filed by Indian Broadcasting Foundation, a Bench of Justices Dipak Misra and AM Khanwilkar stayed the operation of a judgment of the Bombay High Court which had permitted levy of such stamp duty.

Senior Advocate Arvind Datar appeared for Indian Broadcasting Foundation while Senior Advocate KK Venugopal appeared for the State of Maharashtra.

The case is a result of an amendment to the Schedule I of Bombay Stamp Act, 1958 whereby Article 5 (h)(A) was amended. Pursuant to the amendment, agreements relating to “any advertisement on mass media, made for promotion of any product; or programme or event with an intention to make profits or business out of it” was subject to a stamp duty of “Rs. 2.50 for every rupees 1,000 or part thereof on the amount agreed in the contract subject to minimum of rupees 100 and maximum of rupees 10,00,000.”

This amendment was challenged before the Bombay High Court by various petitioners including the Indian Broadcasting Foundation as unconstitutional for impinging upon the Freedom of Speech and Expression guaranteed under Article 19(1)(a) of the Constitution.

By a judgment dated October 27, 2016, a Bench of Justices BP Colabawalla and SC Dharmadhikari of the Bombay High Court turned down the challenge stating that the petitioners could challenge such levy in individual matters on various grounds.

“We clarify that in each individual case, it would be open for the petitioners to point out that the levy is not attracted for the ingredients of Article 5(h)(A) are not satisfied. The element of profit or business is absent. They can always point out some social or welfare schemes of the Government being advertised or Government tenders or advertisements being inserted as part and parcel of their duty to the public or on account of other conditions being imposed on them. They can always urge that in such cases of advertisements in mass media, the levy cannot be imposed. All such contentions can be raised as and when demands are made on the members of the petitioners…. Therefore, in the facts and circumstances of each case, constitutional, legal challenge is still open.

We clarify that the present challenge is rejected because the petitioners could not satisfy the tests emerging from the Supreme Court decisions and highlighted above. A general and sweeping challenge based on the present pleading could never have been accepted by us”, the Bombay High Court noted while turning down the challenge.

The Indian Broadcasting Foundation has appealed against this decision of the Bombay High Court.

When the matter came up for hearing in Supreme Court on Monday this week, Senior Advocate Arvind Datar submitted that the impugned entry in the Bombay stamp Act is a colourable piece of legislation and the State of Maharashtra could not have done indirectly what it is not permitted to do directly.

He further submitted that the expression “through an electronic and print media” has to be given appropriate and adequate emphasis so that the freedom of speech and expression is sustained and no attempt should be made to scuttle its progress. Additionally, it was canvassed by him that if a huge revenue is taken away from the members of the Broadcasting Foundation it will inevitably hamper their freedom of speech and expression.

Senior Advocate KK Venugopal contended that the impugned levy of stamp duty comes within Lists II and III of the Constitution and the State Legislature has the authority to legislate on the same. It was also urged by him that a State Legislature can legislate on aspects of stamp duty for the purpose of revenue generation and it cannot be called a colorable exercise of power. Additionally, it was contended by him that the duty is to be paid by the advertising agency or persons and, thereby, neither the electronic media nor the print media is affected.

He further submitted that the argument that it affects the freedom of press and freedom of speech and expression enshrined under Article 19(1)(a) of the Constitution of India will not hold ground since levy of stamp duty has nothing to do with the concepts that have been highlighted by the petitioner-Foundation.

After hearing the parties, the court noted that the matter needs to be debated and proceeded to stay the judgment of the Bombay High Court. The members of the petitioner Foundation have, however, been directed to maintain accounts of the revenue earned through advertisements during the period of operation of the interim order.

“…we are of the considered opinion that the matter requires to be debated, especially keeping in view the sacrosanctity of the freedom of speech and expression and the involvement of electronic and print media and, therefore, we direct that there shall be stay of the operation of the judgment of the High Court, subject to the member of the petitioner-Foundation keeping accounts with itself and giving at least samples of ten agreements to the respondent-State so that eventually at the time of final adjudication appropriate relief can be moulded. That apart, each of the members of the Foundation shall give a summary of the revenue earned through the advertisement.”

The matter has now been listed for final disposal on September 13, 2017.

Read the Supreme Court order and Bombay High Court judgment below. 

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