The Bombay High Court ruled that the Municipal Commissioner has the authority to charge a fee for issuing licenses for sky-signs and hoardings. Since the statute itself recognises “fees” as a component of the Municipal Fund, distinct from “taxes”, the Court explained that the levy of fees by the municipal authority is a ‘regulatory fee’ and not a tax.
Finding no merit in the contention of the petitioners, the Court held that the Pune Municipal Corporation (PMC) has the authority to levy the license fee, which is a regulatory fee and not a tax. At the same time, it strongly asserted that the introduction of GST does not impact this power, and the retrospective sanction of the enhanced rate, derived from a market-based tender process, would be valid.
Reference was made to a conjoint reading of Sections 244 (Regulations as to sky-signs), Section 245 (Regulation and control of advertisement), and 386(2) (levy of fees for licenses) of the Maharashtra Municipal (MMC) Act, along with the Bombay Provincial Municipal Corporation (Control of Advertisement and Hoarding) Rules, 2003, which establishes a complete statutory scheme for such levy of fees.
The Division Bench comprising Justice G S Kulkarni and Justice Advait M Sethna observed that for a regulatory fee, a direct service to the fee-payer is not essential, and a broad correlation between the fee collected and the expenses incurred for regulation is sufficient. Thus, the Bench explained that the functions of the Pune Municipal Corporation (PMC), including inspections for structural stability, traffic safety, and environmental impact, constitute a comprehensive regulatory mechanism justifying the fee.
In a threadbare manner, the Bench very lucidly explained that the levy by the Municipal Commissioner is a regulatory fee, not an “advertisement tax” under the erstwhile Entry 55 of List II. The legislative competence for this fee is traceable to Entry 5 (Constitution and powers of municipal corporations) and Entry 66 (Fees in respect of any of the matters in this List) of List II, read with Article 243X of the Constitution.
Moving ahead, the Bench cautioned that the introduction of the GST and the repeal of the Maharashtra Advertisements Tax Act, 1967, which pertained to cinematograph ads, would not affect the PMC’s power under the MMC Act to levy this regulatory fee. The Bench pointed out that the two transactions, i.e., (i) the PMC granting a license to the advertiser, and (ii) the advertiser providing a service to its client, are distinct, with separate taxable events.
As far as retrospective sanction and reasonableness of the rate are concerned, the Bench observed that Section 386(2) of the MMC Act uses the word ‘sanction’, not ‘prior sanction’ or ‘previous sanction’. Thus, when the legislature has consciously used the words and deliberately omitted Section 386(2), the Bench concluded the rate of Rs. 222 per sq. ft. p.a. to be reasonable, as it was derived from a market-based tender process and was not exorbitant when compared to rates in Mumbai or even when calculated based on a consistent percentage increase over the years.
Briefly, the dispute pertains to the authority of the Pune Municipal Corporation (PMC) to levy and recover license fees for the grant and renewal of licenses for sky-signs and hoardings. The petitioners, who are outdoor advertisers, had pleaded that said license fee is, in substance, a tax levied without the authority of law, since the PMC had lost its competence to levy such fees/taxes following the 101st Constitutional Amendment Act, 2016, which introduced the Goods and Services Tax (GST) regime and omitted Entry 55 of List II (Taxes on Advertisements) of the Seventh Schedule. In short, the petitioner alleged that the retrospective sanction granted by the PMC’s General Body to the enhanced fee rate of Rs. 222 per sq. ft. per annum is illegal and void.
Appearances:
Senior Advocates Sanjeev M. Gorwadkar and Girish S. Godbole, along with Advocates Niranjan Mogre, Mohommed Hussain B., Javed Patel, Sumit Kothari, Ajay Panicker, and Aditya P. Shirke, for the Petitioner
Advocate General Dr Birendra Saraf, AGP M.P. Thakur, Additional Govt. Pleader A.I. Patel, along with Advocates Madhavi Tavanandi, Abhijit P. Kulkarni, and Krushna Jaybhay, for the Respondent
