Source: Calcutta High Court 

Why in News? 

Recently, the bench of Justices Arijit Banerjee and Justice Kausik Chanda held that the advertisement tax demand by KMC was arbitrary, lacked legal backing, violated principles of natural justice, and was thus quashed. 

• The Calcutta High Court held this in the matter of The Calcutta Municipal Corporation & Ors. v. Cricket Association of Bengal & Ors. (2025). 

What was the Background of The Calcutta Municipal Corporation & Ors. v. Cricket Association of Bengal & Ors. (2025) Case? 

• The Cricket Association of Bengal holds a lease for the Eden Gardens ground in Kolkata.  
• The actual owner of the property is the Ministry of Defence, Government of India, making the Union of India the lessor. 
• In 1996, CAB organized two major cricket events at Eden Gardens: 
  • The inaugural ceremony of the Wills World Cup on 11th February 1996. 
  • A semifinal match of the World Cup on 13th March 1996. 
  • During these events, various advertisements were displayed both inside and outside the Eden Gardens Stadium. 
• Following these events, on 27th March 1996, the Kolkata Municipal Corporation issued a demand notice to CAB. 
• The notice claimed a sum of ₹51,18,450 as advertisement tax for the two days of the World Cup events. KMC invoked Section 204 of the KMC Act, 1980 as the legal basis for this tax demand. 
• CAB, along with its president and secretary, challenged this demand notice by filing a writ petition. Their challenge was based on three primary grounds: 
  • Jurisdictional Challenge:  
    • CAB argued that the advertisements were displayed within Eden Gardens Stadium, which is not a public place. Since the advertisements were not visible to the public from a public street or public place, the provisions of Section 204 of the KMC Act, 1980 (as it existed before the 2019 amendment) did not apply. 
  • Procedural Violations: 
    • CAB contended that the demand notice was arbitrary and issued in breach of natural justice principles. They specifically objected that:  
    • The basis for calculating the claimed amount was not disclosed. 
    • They were not given an opportunity to be heard before the notice was issued. 
    • The notice lacked proper computation details. 
  • Constitutional Immunity:  
    • CAB invoked Article 285 of the Constitution of India, arguing that since the Union of India owns the land housing Eden Gardens Stadium, KMC cannot levy any tax on the property. 

• The Single Judge of the Calcutta High Court accepted CAB's arguments and quashed the demand notice dated 27th March 1996. 
• Aggrieved by the Single Judge's decision, KMC and its officers filed the present appeal challenging the judgment that favored CAB. 
• The case primarily revolves around the interpretation of Section 204 of the KMC Act, 1980 (pre-2019 amendment) concerning advertisement tax, and Article 285 of the Constitution regarding exemption of Union property from State taxation. 
• The fundamental question is whether KMC has the authority to levy advertisement tax on displays at Eden Gardens Stadium, considering the nature of the venue, the visibility of advertisements, and the constitutional protection of Union-owned property. 

What were the Court’s Observations? 

• Statutory Compliance Principle: The court observed that when a statutory power is conferred with a prescribed mode of exercise, no other method can be adopted, following the established principle in Taylor v. Taylor that where power is given to do something in a certain way, it must be done exactly in that manner or not at all. 
• Arbitrary Tax Assessment: The court held that without framing regulations or budget estimates prescribing advertisement tax rates, KMC's computation and imposition of such tax would be arbitrary with no rational basis, allowing KMC to quantify tax as per its sweet will, which cannot be countenanced under the rule of law. 
• Natural Justice Violations: The court noted that the demand notice lacked computation details and provided only a two-day response window, which was unreasonable and arbitrary, while KMC failed to address CAB's reply and instead initiated criminal proceedings, violating principles of natural justice. 
• Legal Unsustainability of Demand: The court held that the demand notice was legally unsustainable as it failed to provide any breakup of the ₹51,18,450 claimed, did not specify which advertisements were taxed, and gave no explanation of calculation basis, making it impossible to understand or contest meaningfully. 
• Definition of Public Place: The court observed that 'public place' must be given its natural meaning as a place open to the public at large without any restrictions, where any member of the public has access without requiring anyone's permission, and as soon as conditions are imposed, that place ceases to be public. 
• Eden Gardens as Private Space: The court held that Eden Gardens Stadium cannot be considered a public place since CAB, as lessee, can deny entry to anyone even during matches, and members of the public do not have absolute or unrestricted access, emphasizing that capacity or visitor numbers do not determine public nature. 
• Rejection of "Restricted Public Place" Concept: The court observed that the concept of "restricted public place" finds no place in Section 204 of the KMC Act nor is defined in any dictionary, rejecting KMC's argument that Eden Gardens could be classified under this non-existent category. 
• Tax Liability Principle: The court found merit in CAB's argument that even if advertisement tax was leviable, it could only be imposed on advertisers and not on CAB, absent any evidence of arrangement whereby CAB agreed to bear the advertisement tax burden. 
• Final Determination: Since Eden Gardens Stadium was held not to be a 'public place' making Section 204 inapplicable, and the demand notice was otherwise bad in law, the court dismissed the appeal without considering other contentions including constitutional immunity under Article 285. 

What is the Rule of Law? 

• Fundamental Definition: Rule of Law is one of the ideals of political morality representing government based on principles of law and not of men, acting as a building block for the formation of a democratic society. 
• Universal Principles: Rule of Law is founded on four universal principles - just law, open government, impartial and accessible justice, and accountability. 
• Constitutional Status: Though not explicitly defined in the Indian Constitution, Rule of Law has been declared by the Supreme Court as one of the basic features of the Constitution and is seen as an integral part of good governance. 
• Dicey's Three Principles: According to A.V. Dicey, Rule of Law contains three basic principles - supremacy of law (no punishment without legal violation proven in court), equality before law (no one is above the law), and predominance of legal spirit (constitutional rights derived from court decisions). 
• Core Characteristics: Rule of Law ensures supremacy of law, equality before law, protection against arbitrary actions, requirement that all government actions conform to law, and that the judiciary serves as preserver and protector of this principle. 
• Constitutional Implementation: The Indian Constitution incorporates Rule of Law through various provisions including judicial review powers (Articles 13, 32, 136, 142, 226), fundamental rights (Article 14 for equality, Article 21 for due process), and the Preamble's principles of justice, equality and liberty. 
• Binding on All Organs: All three organs of government - Legislative, Executive and Judiciary - must adhere to the principle of Rule of Law, with any law made by Central or State Governments required to be consistent with the Constitution. 
• Natural Justice Integration: Rule of Law takes into account the principle of natural justice and serves as the fundamental basis of democracies around the world, requiring independent and impartial judiciary. 
• Indian Exceptions: India does not follow Dicey's concept in strict sense, providing certain exceptions including discretionary powers to President and Governor (Articles 72, 85, 161, 200), immunities to constitutional authorities, police powers for cognizable offences, and diplomatic immunities under international law. 
• Article 285 : Article 285 exemplifies Rule of Law by establishing clear constitutional principles for Union property taxation - providing general exemption from State taxation while allowing specific exceptions for pre-constitutional liabilities, thus preventing arbitrary State action against Union property.