Municipal Advertisement Tax demand quashed post-GST; Refund allowed for advance tax paid
Issue
Validity of Demand: Can a Municipality (Nagar Nigam) continue to levy and demand “Advertisement Tax” for periods after the implementation of GST (01.07.2017), given the omission of Entry 55 from the State List by the 101st Constitutional Amendment?
Refund: Is the taxpayer entitled to a refund of advertisement tax paid in advance for the period overlapping with the GST regime (i.e., post-01.07.2017)?
Facts
Petitioner Profile: An advertising service provider having agreements with the Nagar Nigam for displaying hoardings.
Timeline:
01.07.2017: GST Act came into force. Entry 55 of the State List (taxes on advertisements) was omitted.
Period in Dispute: 13.02.2018 to 12.02.2019 (Demand Period) and 01.07.2017 to 12.02.2018 (Refund Period).
The Demand: The Nagar Nigam issued a demand notice and recovery certificate for Advertisement Tax for the period 13.02.2018 to 12.02.2019, relying on pre-GST agreements.
The Refund Claim: The petitioner had paid Advertisement Tax in advance for the first year. Since the GST regime started on 01.07.2017, the petitioner sought a refund for the tax covering the post-GST period (01.07.2017 to 12.02.2018).
Defense: The Nagar Nigam argued that the pre-existing agreements and “saving clauses” allowed them to collect the tax.
Decision
Loss of Legislative Competence: The High Court held that the 101st Constitutional Amendment removed Entry 55 from List II (State List). Consequently, the State (and by extension, the Municipality) lost the legislative competence to levy tax on advertisements.
Section 173 of GST Act: The enactment of the U.P. GST Act (specifically Section 173) omitted the relevant provisions of the U.P. Municipal Corporation Act that empowered the levy of advertisement tax. Therefore, the Nagar Nigam lacked statutory authority to levy this tax after 01.07.2017.
Precedent: The Court relied on settled precedents (Pankaj Advertising and DM Advertisers), confirming that contracts cannot override statutory repeal.
Outcome:
Demand Quashed: The demand notice and recovery certificate for the post-GST period were quashed.
Refund Allowed: The Court held that the tax collected for the period after 01.07.2017 (when the levy became unconstitutional) must be refunded to the petitioner, subject to the doctrine of unjust enrichment (proving burden was not passed on).
Key Takeaways
GST Subsumes Local Taxes: Advertisement Tax levied by local bodies was one of the major taxes subsumed into GST. Any demand for “Advertisement Tax” (distinct from license fees for using municipal land) for periods after 01.07.2017 is legally invalid.
Contract vs. Statute: A municipal contract requiring payment of “taxes” becomes void regarding that specific tax if the underlying law authorizing the tax is repealed. The Municipality cannot enforce a repealed tax as a contractual obligation.
HIGH COURT OF ALLAHABAD
Saffron Communication (P.) Ltd.
v.
State of U.P.*
Saumitra Dayal Singh and INDRAJEET SHUKLA, JJ.
WRIT TAX No. 813 of 2019
NOVEMBER 13, 2025
Manish Kumar Nigam and Sanjay Kumar Mishra for the Petitioner. Pranjal Mehrotra and Shyam Mani Shukla for the Respondent.
ORDER
1. Heard Sri G.K.Singh, learned Senior Counsel assisted by Sri Saurav Pandey, learned counsel for the petitioners and Sri Shambhavi Nandan along with Sri Shyam Mani Shukla, learned counsel for the Nagar Nigam and Sri Ankur Agarwal, learned counsel for the State.
2. Present petition has been filed to challenge the recovery certificate dated 12.06.2019 for recovery of Rs.2,55,78,080/- towards advertisement tax. That recovery certificate has been issued pursuant to demand notice dated 20.09.2018. Further prayer has been made to refund the amount deposited by the petitioner towards advertisement tax, for the period 01.07.2017 to 12.02.2018.
3. Earlier, writ petition was dismissed vide following order dated 22.07.2019:
“Supplementary Affidavit filed today is taken on record.
Heard Sri M.K. Nigam, learned Counsel for the petitioner and Sri S.M. Shukla, learned Counsel for the respondents-Nagar Nigam and Sri B.P.S. Kachhawah, learned Standing Counsel for the respondents-State.
The instructions have come, which are taken on record. The instructions reflect that the petitioner has filed Civil Suits and has even obtained an injunction in Civil Suit No.60 of 2019.
Learned Standing Counsel has made a statement before this Court that although the petitioner has applied for withdrawal of the Suits but it is in one of the suits in which there is no injunction.
In view of the above, we are not inclined to interfere in this matter.
This Writ Petition is dismissed as above. No costs. “
4. The petitioner challenged that order before the Supreme Court in Saffron Communication (P.) Ltd. v. State of U. P. [Civil Appeal No. 2710 of 2024, dated 20-2-2024]/arising out of Special Leave to Appeal (C) No.18312 of 2019. Leave was granted and the Civil Appeal has been disposed of with the following observation:
“These prayers ought to have been considered by the High Court since we find that these prayers are distinct to the reliefs sought for by the appellant in the suits filed by them. Moreover two of the suits have been withdrawn by the appellant. In the circumstances, the impugned order is set aside. The matter is remanded to the High Court to consider the writ petition on its own merits.”
5. Thereafter, pleadings have been exchanged. Along with the rejoinder affidavit the petitioner has brought on record order dated 17.07.2019 passed in Original Suit No.171/2019, whereby Original Suit filed by the petitioner that became the ground for dismissal of the writ petition, was dismissed as withdrawn by the learned Civil Judge (Senior Division) Ghaziabad. That order has attained finality. Accordingly, the writ petition has been heard.
6. Petitioner is a service provider engaged in the activity of hosting advertisements through hoardings, signage etc. at various public places within the limits of Nagar Nigam, Ghaziabad. For the purposes of conduct of its business it entered into three agreements with the Nagar Nigam, Ghaziabad for the period 13.02.2017 to 12.02.2019, whereunder it was made entitled to put up advertisements in specific zones against payment of advertisement fee and tax. Thus, under these three agreements the petitioner was made liable to pay advertisement fee and taxes on per annum basis as below.
| Agreement date | Premium | Tax | Period |
| 18.01.2017 | 1,16,00,000/- | 53,22,520/- | 13.02.2017-12.02.2019 |
| 18.01.2017 | 2,28,59,700/- | 68,86,620/- | 13.02.2017- 12.02.2019 |
| 20.04.2017 | 2,90,00,000/- | 1,33,68,940 | 23.02.2017-22.02.2019 |
7. It is also not in dispute that the petitioner deposited advertisement tax in advance for the first year i.e. for the period 13.02.2017 to 12.02.2018.
8. During the first year itself, w.e.f. 01.01.2017 upon 101st Constitution Amendment and enactment of U.P. GST Act, 2017, the legislative competence of the State legislature to impose advertisement tax was done away. Specific to the brought facts before us, Section 173 and 174 of U.P. GST Act, 2017 read as below:
“[173.] Amendment of certain Acts.- Save as otherwise provided in this Act, on and from the date of commencement of this Act,-
(i) In the Uttar Pradesh Municipal Corporation Act, 1959 Clause (h) of sub-section (2) of Section172 and Sections 192, 193 shall be omitted.
….
[174.] Repeal and Saving.-
….
(2) The repeal of the said Acts and the Amendment of the Acts specified in Section 173 (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in sub-section (1) of Section 173 shall not-
(b) affect the previous operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder: or”
9. Submission is that after the enforcement of the U.P. GST Act, 2017 the legislative competence of the State Legislature was taken away by virtue of 101st Constitution Amendment Act. Consisted thereto Section 173 and 174 of the U.P. GST Act, 2017 were enforced on the executive authorities under that constitutional mandate. Resultantly, no levy of advertisement tax may arise or be pressed against the petitioner for the period 01.07.2017 onwards.
10. Consequently, in the first place Nagar Nigam may never demand any amount towards advertisement tax for the period 13.02.2018 to 12.02.2019 under the agreement entered into between the parties and further the Nagar Nigam may remain obligated to refund the amount collected towards advertisement tax for the period 01.07.2017 to 12.02.2018.
11. To the extent, a private law between the parties which the agreements are, cannot override the statutory law and further to the extent that private law would not only remain subservient to the statutory law, the Nagar Nigam is obligated to refund the excess amount.
12. Learned Senior Counsel has also advanced the submission and relied on the two decisions of the Court in Pankaj Advertising v. State of U.P.GSTL 162 (Allahabad)/AIR ONLINE 2019 ALL 3054 and DM Advertisers Agency v. State of U.P. GSTL 162 (Allahabad)/AIRONLINE 2019 ALL 3002.
13. On the other hand, learned counsel for the Nagar Nigam has referred to paragraph nos.7 & 8 of the counter affidavit. They read as below:
“7. That it is most respectfully submitted that by virtue of Section 192 of the U.P Municipal Corporation Act, 1959 the Respondent was empowered to impose a tax mentioned in clause (h) of sub section (2) of Section 172, on every person who erects, exhibits, fixes or retains upon or over any land, building, wall, hoarding or structure any advertisement or who displays any advertisement to public view in any manner. However, the State Government enacted the Uttar Pradesh Good and Service Act, 2017 (hereinafter referred to as U.P GST Act) wherein Section 173 of the U.P GST Act omitted Section 172 (2) (h) and Section 192 of the U.P. Municipal Corporation Act 1959 with effect from 01.07.2017. Moreover, it is pertinent to bring to the notice of this Hon’le Court that a bare perusal of Section 174 (2) evidently enumerates that the repeal/omission of the above statutes will not affect any tax due prior to 01.07.2017 nor will affect any such recovery proceedings which may be initiated as if this Act was not amended or repealed.
8. That In light of the aforesaid it is submitted that the said three agreements dated 18.01.2017 18.01.2017 and 20.04.2017 were prior to the Implementation of the U.P GST Act 2017 I.e.01.07.2017 and therefore as also stated in Section 174 (2) of the U.P GST Act 2017 the amendment/omission brought through the U.P GST Act 2017 would not affect the aforesaid tenders as the said advertisement tax were due prior to 01.07.2017. Thus the Respondent was lawfully justified in levying an advertisement tax on the Petitioner as it was empowered to do so under Section 192 of the U.P Municipal Corporation Act, 1959 as the same had not been repealed or amended on the said dates and subsequently Section 174 (2) of the UP GST Act also reiterated the aforesaid to the extent that any tax that was due prior to 01.07.2017 will not be affected by the amendment/omission under Section 173 and such due tax would be levied as if the said Acts had not been amended.”
14. Further, it has been submitted the petitioner may not be entitled to refund of any amount deposited towards tax since it has passed on that liability to the service recipient. Thus, the claim of refund has been resisted on the ground of unjust enrichment.
15. Having heard learned counsel for the parties and perused the record, in law the issue is no longer res integra. In Pankaj Advertising Prop. (supra), it was observed as below:
“17. This Court has no hesitation in holding that after the omission of Entry-55 of the List-II of the Seventh Schedule to the Constitution of India having been omitted by the 101 Amendment Act, 2016 with effect from 16.9.2016, even the State Government did not have the legislative competence to levy or collect taxes on advertisement which was earlier available under Entry-55, this coupled with the fact that the power of taxation earlier vested with the municipalities under section 128(2)(vii) of the U.P. Municipalities Act, 1916 having been omitted by virtue of Section 173 of the U.P. Goods and Service Tax Act, 2017, the municipality did not even have the statutory competence to levy, impose or collect Advertisement Tax.
18. In the said view of the matter, the levy and collection of the Advertisement Tax under the provisions of Nagar Palika Parishad, Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 is clearly without legislative or statutory competence and is ultra-vires under Article 265 of the Constitution of India, U.P. Municipalities Act, 1916 and U.P. Goods and Service Tax Act, 2017. This Court has no hesitation in holding that the said Nagar Palika Parishad, Hathras (Vigyapan Kar Ka Nirdharan Aur Wasuli Viniyaman) Upvidhi, 2015 is without any legislative or statutory competence and, thus, are hereby struck down.”
16. In his concurring opinion, Hon’ble Justice Pankaj Mithal as he then was, has further observed as below:
“34. In short, the Nagar Palika Parishad had no legislative competence on 19.08.2017 to promulgate the aforesaid bye laws in view of omission of Section 128(2)(vii) of the Municipalities Act by virtue of Section 173 of the G.S.T. which was enforced on 01.07.2017 as also due to the omission of Entry 55 of List II of 7th Schedule to the Constitution of India empowering the State to make bye-laws in respect of tax on advertisement vide Section 17 of the Constitution (101st amendment) 2016 enforced w.e.f. 16.09.2016.
35. Accordingly, the aforesaid bye-laws are struck down as ultra-vires.”
17. The above decision has been followed in M/S DM Advertisers Agency (supra).
18. No contrary decision has been shown to us. Accordingly, in that state of the law, we find ourselves in complete agreement with the law laid down a co-ordinate Bench in Pankaj Advertising Prop. (supra).
19. Consequently, the demand notice and the consequential Recovery Certificate demanding advertisement taxes for the period 13.02.2018 to 12.02.2019, are quashed.
20. Second, we find the petitioner’s claim for refund of amount deposited towards payment of advertisement tax for the period 01.07.2017 to 12.02.2018 is good in law. Let that amount be computed and paid out to the petitioner by the Nagar Nigam, Ghaziabad within a period of three months from today subject to unjust enrichment.
21. The writ petition is allowed. No order as to costs.