Mere Mention Of Product Name In Which Business Establishment Is Being Run Would Not Be Advertisement Unless Customers Are Solicited By Such Display: SC Reiterates

The Supreme Court reiterated that merely mentioning the name of the product on which the business establishment is being run would not be an advertisement until and unless the customers are solicited by such displays.

The Court disposed of a set of Civil Appeals challenging the order of the High Court which affirmed the demand notices passed by the Indore Municipal Corporation (IMC). The IMC had demanded advertisement taxes from the Appellants (Tata Motors and Hyundai Vehicles) for display boards depicting the respective vehicles. The Court emphasized that depicting the nature of the respective vehicles would be an inseparable part of the Appellants' business. 

The Bench comprising Justice S. Ravindra Bhat and Justice Aravind Kumar observed, “prima facie, it would indicate that as dealers of Tata Motors and Hyundai Vehicles appellants have displayed their name board of respective business establishment which is also depicting the nature of the respective vehicles which are being sold and it would be inseparable part of the appellants’ business establishment. By mere mentioning the name of the product in which the business establishment is being run would not partake the character of the advertisement until and unless by such display customers are solicited”.

Advocate Kapil Arora appeared for the Appellants and Advocate Mishra Saurabh appeared for the Respondent.

Both the Appellants had put up a display board showcasing their company’s name and were issued notices by the Second Respondent demanding advertisement tax. Both the Appellants challenged the notices before the High Court by way of Writ Petitions which were dismissed by the Court while relying on the Judgment in the case of Bharti Airtel v State of Madhya Pradesh [WP No. 2296 of 2012]. Aggrieved by the order, the Appellants filed a set of Civil Appeals challenging the order of the High Court whereby, the demand notices raised against the Appellants for payment towards advertisement tax were affirmed.

The Bench noted that the Indore Municipal Corporation is empowered to carry out all civil body functions including levying and collecting various taxes including advertisements tax under Article 243 Q of the Constitution. The Court observed that under clauses 4, 5, and 6 of the Municipal Corporation (advertisement) by-laws, 1976 (By-Laws), the Municipal Corporation is also empowered to collect advertisement taxes.

The Court ascertained the issue: “whether the display boards or sign boards or name boards as displayed by the appellants would partake the character of “advertisement” so as to attract Section 132 of the Act (Indore Municipal Corporation Act, 1956) and thereby the demand is to be sustained?”.

The Bench relied on the case of ICICI Bank and Another v Municipal Corporation of Greater Bombay [(2005) 6 SCC 404]. The Court held that mere mentioning of the name of the product in which the business establishment is being run would not partake the character of the advertisement until and unless by such display customers are solicited. However, if the signboards so displayed would in any manner promote a particular product or goods or services or in other words it would attract customers to purchase a particular brand of product or goods or services and such display provides information about the product/ services and solicit the customers, it may amount to advertisement while the latter would only be an information to the public.

Furthermore, the Court observed that the Municipal Corporation is not empowered to demand tax for the display of information through name boards or display boards as it was never the legislative intent to impose tax liability on such signboards. The Court further emphasized that even if display boards are considered as advertisements, such levy of taxes would be without authority of law and would violate Article 265 and Article 19 Clause (1) Subclause (a) and (g) of the Constitution.

“The statutory provisions noted hereinabove does not empower the Municipal Corporation or its agency to demand tax for display of information through name boards or display boards. It would emerge from the statutory provisions noted hereinabove that the legislative intent was never to impose tax liability on sign boards but only on advertisement. Prima facie, the sign boards are display boards displayed by the appellants’ companies in the instant appeals would indicate that they have displayed on their respective premises the general information to the public about the products being dealt with by them and it would not reflect any soliciting of customers or induce the general public to buy the products dealt by the appellants and displayed on the board. Even in such circumstances, if it is held that it amounts to advertisement, such levy would be without authority of law and would find foul of Article 19(1)(a), 19(1)(g) and Article 265 of the Constitution of India”, the Bench observed.

Therefore, the Court directed the First Respondent to examine afresh the objections filed by the Appellants against the impugned demand notices within the period of eight weeks.

Accordingly, the Court disposed of the Appeals.

Cause Title: M/S Harsh Automobiles Private Limited v Indore Municipal Corporation (2023 INSC 893)

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