Kolkata Municipal Corporation cannot Levy Advertisement Tax on CAB without framing appropriate Regulations: Calcutta HC [Read Order]

The Cricket Association of Bengal ( ‘CAB’), the respondents enjoys a lease of the Eden Gardens ground in the city of Kolkata. The owner of the property and the lessor is the Ministry of Defence, Government of India. The inaugural ceremony of the Wills World Cup of 1996 was organized by CAB at the Eden Gardens on February 11, 1996. Thereafter, a Semifinal match of the World Cup was held at the said Cricket ground on March 13,

1996. Certain advertisements had been put up both inside and outside the Eden Gardens Stadium.

The Kolkata Municipal Corporation (KMC) issued a demand notice dated March 27, 1996, claiming a sum of Rs. 51,18,450/- from CAB on account of advertisement tax for the aforesaid two days of the Wills World Cup, by invoking Section 204 of the KMC Act, 1980.

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CAB and its president and secretary challenged such demand notice by filing the instant writ petition. The challenge was based on three grounds. Firstly, the concerned advertisements had been displayed within the Eden Gardens Stadium, which is not a public place, and the same were not visible to the public from a public street or a public place. Therefore, the provisions of Section 204 of the KMC Act, 1980 as it stood before amendment in 2019, did not apply. Secondly, the demand notice suffered from the vice of arbitrariness and had been issued in breach of the principles of natural justice.

The basis for the amount claimed in the demand notice had not been disclosed. The writ petitioners had not been granted an opportunity of being heard prior to the issuance of the notice. Thirdly, in view of Article 285 of the Constitution of India, the Union of India being the owner of the land which houses the Eden Gardens Stadium, the KMC authority cannot levy any tax thereon.

Single Judge upheld the grounds of challenge as put forth by the writ petitioners and quashed the demand notice dated March 27, 1996. Being aggrieved, KMC and its officers have come up in appeal.

Before recording the respective arguments of the parties, we may note the provisions of Section 204 of the KMC Act, 1980 prior to its amendment in 2019 and Article 285 of the Constitution of India,

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It is clear that the public at large, on purchasing tickets, are allowed to enter the ground/Stadium. Hence, the entry to the Stadium is open to the public at large on fulfilment of certain terms and conditions. The entry is not restricted to a defined body of individuals with a particular social standing or specific qualification or professional attainment or interests or purposes. When entry to Eden Gardens is thrown open to the public at large on purchase of ticket, the Eden Gardens ground/Stadium does not remain a private place but attains the status of a restricted public place.

It was argued that when advertisements are deployed either inside or outside the Eden Gardens Stadium, such advertisements are visible from a public place. The members of the public upon entering Eden Gardens area or Stadium see the advertisements. Further, the sports events conducted at the Eden Gardens are telecast through different modes for the purpose of allowing the people to watch and enjoy the same from public places/ streets. Hence, it cannot be said that the provisions of Section 204 of the KMC Act, 1980, could not have been invoked in respect of such advertisements.

The imposition of advertisement tax has been made on the basis of calculation at the prescribed rates. In the instant case, though the demand notice did not include the details of computation, it was open to CAB to ask for such details, but it did not do so.

Without framing appropriate Regulations, KMC could not have levied advertisement tax in respect of the concerned advertisements. KMC has not been able to produce any Regulation in the aforesaid regard, nor has KMC been able to indicate that the budget estimate for the relevant year prescribes the rate at which the KMC could have levied advertisement tax. Hence, there does not appear to be any basis on which or any formulae recognized by law following which the computation of tax has been made.

A division bench Justice Arijit Banerjee and Justice Kausik Chanda observed that without framing Regulations or without the budget estimate prescribing the rates at which advertisement tax may be levied by KMC, computation and imposition of such tax would be arbitrary. It would have no rational basis. It would then be open to KMC to quantify such tax as per its sweet will. This cannot be countenanced under the rule of law. There must be a guiding factor following which the advertisement tax can be assessed and imposed.

Even if CAB has earlier paid advertisement tax demanded by KMC, CAB cannot be prevented from arguing the point of absence of Regulations, etc, since there can be no estoppel against a statute.

Since the inside of the Eden Gardens Stadium is not a ‘public place’ the court held that Section 204 of the KMC Act (as it was before the 2019 amendment), would not be attracted. The court held that the notice of demand is even otherwise bad in law.

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