Eden Gardens Not A 'Public Street', Imposing Ad Tax Without Regulations Violates Rule Of Law: Calcutta High Court Quashes Demand Notice

The Calcutta High Court bench of Justices Arijit Banerjee and Justice Kausik Chanda has held that without framing Regulations or without the budget estimate prescribing the rates at which advertisement tax may be levied by Kolkata Municipal Corporation (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, which cannot be countenanced under the rule of law.Brief Facts:Cricket Association of Bengal (CAB) organized the Wills World Cup 1996 inaugural ceremony and a semifinal match at Eden Gardens on February 11 and March 13, 1996. Following this, the Kolkata Municipal Corporation issued a demand notice on March 27, 1996, seeking ₹51,18,450 as advertisement tax under Section 204 of the KMC Act, 1980. CAB and its office bearers challenged the demand through a writ petition.The demand notice was challenged for being outside the scope of Section 204 KMC Act, arbitrary and violative of natural justice, and barred by Article 285 of the Constitution. The Single Judge accepted these grounds and quashed the notice, prompting KMC's appeal.The Appellant submitted that 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 further submitted that advertisements at Eden Gardens were visible to the public attending the events and through broadcasts viewed from public places, making Section 204 of the KMC Act applicable.The tax demand wasn't arbitrary or violative of natural justice, as it was based on prescribed rates. Though the computation details weren't provided in the notice, CAB could have requested them but failed to do so.It was further submitted that the property in question is enjoyed and controlled by CAB which is a society registered under the Societies Registration Act. It has a separate and distinct entity and comes within the definition of 'owner' when it uses and enjoys the property of the Union of India under lease. The property in question is assessed by KMC making CAB the person liable to pay property tax. In any event, advertisement tax is different from property tax and Article 285 does not have any manner of application.In reply, the Respondent submitted that the in-stadia advertisements were displayed entirely within the Eden Gardens Stadium and were not visible from outside. To view them, one had to enter the stadium. Since the interior of Eden Gardens does not qualify as a "public street" under Section 2(71) of the KMC Act, 1980.It was further submitted that Access to Eden Gardens Stadium is neither absolute nor unrestricted. Entry is controlled by CAB and limited to specific match days, requiring valid tickets that permit access only to designated areas for a limited time. Since access is conditional and limited in scope and number, the stadium cannot be considered a "public place." Accordingly, no advertisement tax is payable for in-stadia advertisements under the KMC Act.It was also contended that under Section 204 of the KMC Act, 1980 (prior to its 2019 amendment), no Regulations were framed as required by the Act. In the absence of such Regulations, there was no lawful basis for computing advertisement tax or raising a demand against CAB through the impugned notice or otherwise.It was further submitted that since the Union of India owns the land and structures of Eden Gardens Stadium, and CAB holds no ownership rights, Article 285(1) of the Constitution bars KMC from imposing any tax on CAB in respect of the stadium. The exception under Article 285(2) does not apply, as Eden Gardens was not subject to tax immediately before the Constitution came into force.It was further submitted that the sovereign immunity under Article 285(1) of the Constitution is broad and absolute, shielding all Union property from any form of taxation by a State or local authority. This immunity extends to all kinds of taxes, including advertisement tax on displays erected on Union-owned property. The provision does not differentiate among types of taxes, and thus, its protection is comprehensive.Observations:The court noted that the demand notice issued by KMC lacked any breakup or computation details, merely stating a lump sum, making a meaningful response difficult. Although CAB replied on April 1, 1996, KMC did not address this but instead initiated criminal proceedings months later in December 1996. The 2-day response window in the notice was unreasonable, especially since no urgency was evident. As no opportunity of hearing was granted, the notice clearly violated principles of natural justice.It further observed that Requiring CAB to pay the demanded amount within three days and file objections within two days of receiving the notice was arbitrary and unreasonable. As a statutory authority, KMC had a duty to act fairly and provide adequate time...

Eden Gardens Not A 'Public Street', Imposing Ad Tax Without Regulations Violates Rule Of Law: Calcutta High Court Quashes Demand Notice

Mohd Malik Chauhan

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