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2025 DIGILAW 950 (KER)

Fathima W/o. P. Ummar v. State Of Kerala

2025-04-10

BECHU KURIAN THOMAS

body2025
JUDGMENT : Petitioners in all these writ petitions are owners of buildings situated in Mannarkkad Municipality. They challenge the demand notices issued to them, demanding property tax. Directions are also sought to declare the demand of tax and penal interest imposed on them as being without authority of law. Several writ petitions have been filed challenging the assessment of property tax in various Municipalities carried out under the Kerala Municipality Act, 1994 (for short 'the Act'). This batch of writ petitions relate to the demand notices issued to building owners in Mannarkkad Municipality, which was upgraded to Municipality only in 2015. 2. Petitioners in W.P.(C) No.9903/2024 and W.P(C) No.9993/2024 are owners of buildings situated within the limits of Mannarkkad Municipality and they had paid property tax for various periods as per the earlier method of assessment. In the meanwhile, Municipality imposed property tax retrospectively from 2016-17, contrary to a decision taken by the Council. While some of the writ petitioners challenge the demand notices issued to them apart from directions to accept property tax at the revised rate only from 2023-24 onwards, some others have questioned the very revision of tax itself. Since the remaining writ petitions are either challenging the demand notices issued or the revision of tax, the details are not being narrated here. 3. In W.P.( C) No. 10139 /2025, the relief claimed is different. Petitioner in that writ petition has challenged a Government Order dated 18-05-2024, cancelling Decision No. 17/17 dated 16-09-2023 and Decision No.1/1 dated 04-10-2023 of the Mannarkkad Municipality. According to the petitioner, the Municipality had by Decision No.17/17, decided to levy the revised property tax only with effect from 2020-21 onwards. However, the Secretary of the Municipality raised an objection against the said decision and sought a review of the matter. The Council of the Municipality reconsidered the matter and as per Decision No.1/1 dated 04-10-2023, decided to stick to the decision already taken. Thereafter the Secretary forwarded the resolution of the Municipality as per section 49 of the Act to the Government. However, since there was no response from the Government, the Secretary issued an Order dated 02.11.2023 levying property tax on revised rates, as decided by the Council. 4. Subsequently, petitioner learnt that the Government cancelled the resolutions passed by the Municipality by a belated order. However, since there was no response from the Government, the Secretary issued an Order dated 02.11.2023 levying property tax on revised rates, as decided by the Council. 4. Subsequently, petitioner learnt that the Government cancelled the resolutions passed by the Municipality by a belated order. Petitioners contend that the Government lacks authority to cancel the resolutions since Government had not responded within a period of 15 days as per the second proviso to section 49(1)(b) of the Act. Thereafter, when the Municipality started issuing demand notices at revised rates for years prior to 2020-21, petitioner has approached this Court through the writ petition. The petitioner contends that the demand notices are barred under Section 539 of the Act. Petitioner also contended that the revision of rates and assessment of tax are without following the procedure prescribed under the Act and Rules. 5. In the counter affidavit filed by the respondents, it is averred that, after the Mannarkkad Municipality came into being in 2015, a decision was taken by the Municipality on 19.09.2016, as per Resolution No.7 to implement the amended provisions of section 233 of the Act and the Rules thereon in the Municipality and to levy property tax on the basis of plinth area. After the upgradation of the Grama Panchayat into a Municipality, the process of verification of the buildings for the purpose of assessing the plinth area was a time consuming process due to insufficient staff. Pursuant to section 233 of Act, the Kerala Municipality (Property Tax, Service Cess and Surcharge) Rules, 2011 (hereinafter referred to as 'the Rules') came into force on 14.01.2011, and the minimum and maximum limits of rates of basic property tax were also notified by an order of the same date. Though the work for effecting change of property tax as per plinth area commenced in the Municipality on 12.11.2018, the same came to a standstill until a new Council took charge and the entire work of collecting data was completed by 2023 and demand notices were issued. 6. While so, the Municipality had, by a resolution dated16.09.2023, resolved to restrict the period of demand from 2020-21 onwards and waived the demands for the period from 2016-17 to 2019-20. Subsequently, in exercise of the powers under section 49(b) of the Act, the Secretary disagreed with the resolution stating that it is contrary to the direction of the Government Order dated 06.03.2019. Subsequently, in exercise of the powers under section 49(b) of the Act, the Secretary disagreed with the resolution stating that it is contrary to the direction of the Government Order dated 06.03.2019. Despite the disagreement, the Municipality again resolved on 04.10.2024 to maintain its stance of collecting property tax only from 2020-21. Thereafter the Secretary initiated steps to recover the property tax with effect from 2020-21, as per its proceedings dated 02.11.2023. In the meantime, the Government had, by an order dated 18.05.2024, revoked the resolution of the Municipality to charge property tax from a date subsequent to 01.04.2016. According to the respondents, the building owners are liable to remit the property tax with effect from 01.04.2016, in view of the Government Order. 7. On 02.11.2024, a learned Single Judge of this Court had directed the Municipalities to file affidavits. Pursuant to the above direction, an affidavit has been filed by the second respondent stating that the Secretary informed the public regarding the revision of rate of property tax for each kind of building in the municipal area as per a draft notification published in the Malayala Manorama daily produced as Ext.R1(e) dated 30-07-2016 and that the assessment of buildings were conducted in accordance with the Rules and property tax has been fixed in accordance with Ext.R1(e) and R1(l) following the procedure contemplated under the Rules. 8. I have heard Sri. Vinod Madhavan, Sri. Shameem Ahmed, Sri. Gokuldas V.V and other learned Counsel on behalf of the petitioners while Sri. P.R Venkatesh, the learned Standing Counsel for the respondent Municipality and Smt. K Deepa, the learned Government Pleader argued on behalf of the respondents. 9. The issues that arise for consideration are: (i). What is the mode of assessment contemplated under section 233 of the Act as well as the Rules thereon? (ii). Whether there are any non-compliances by Mannarkkad Municipality with the requirements of law in levying property tax and if so, whether such non-compliance would affect the levy and the consequential demand? (iii) Whether the power under section 282 of the Act can be exercised to levy property tax from 2016-17 onwards? (iv) Whether the demand notices issued in the instant cases are barred by limitation? (v) Whether the Government Order dated 18-05-2024, cancelling resolution No. 17 dated 16-09-2023 and resolution No. 1 dated 04-10-2023 is valid? The above issues are dealt with separately as below. (iv) Whether the demand notices issued in the instant cases are barred by limitation? (v) Whether the Government Order dated 18-05-2024, cancelling resolution No. 17 dated 16-09-2023 and resolution No. 1 dated 04-10-2023 is valid? The above issues are dealt with separately as below. Issue No. (i). What is the mode of assessment contemplated under section 233 of the Act as well as the Rules thereon? 10. For easier comprehension, the different stages and steps in fixing the annual property tax of a building in a Municipality are narrated below: Stage 1. Fixing the basic property tax 1. Government to fix the minimum and maximum limits of rates of basic property tax for one square metre of plinth area for the different categories of buildings and notify the date that it shall come into force. [See Sec.233(2)] 2. Municipality to inform the public through publication in the notice board and in a newspaper about the Council's intention to fix the basic property tax and invite objections. [See Sec. 233(3) and Rule 4(2)]. 3. Fix the rates of basic property tax for each category or sub-category of buildings by a resolution of the Municipal Council. [See Sec.233(3) and Rule 4(1)] 4. The final rates of basic property tax fixed by the Council, including the date of commencement and period of operation shall be published on the noticeboard of the office of Municipality and in two newspapers. [See Sec.233(3) and Rule 4(4)] 5. Government to notify the date on which the rates of the basic property tax fixed by the Council shall come into force. [See Sec. 233(5)]. 6. Classify the Municipality into prime zones, secondary zones and tertiary zones and publish a notice inviting objections to such classification. [See Rule 7(1)]. 7. Finalise the zones after examining the objections and publish them on the notice board of the Municipality. [See Rule 7(3)] 8. Classify the roads and pathways within the Municipality as roads having a width of 5 m and more/less than 5 m, apart from pathways with a width of 1.5 m or less. [See Rule 8]. 9. Assess the basic property tax of a building by multiplying the basic rate of property tax with the plinth area of the building. [See Sec.233(6) and Rule 5(2) ]. Stage 2. Assessment of Annual Property Tax. 1. [See Rule 8]. 9. Assess the basic property tax of a building by multiplying the basic rate of property tax with the plinth area of the building. [See Sec.233(6) and Rule 5(2) ]. Stage 2. Assessment of Annual Property Tax. 1. A public notice in Form-1 shall be published by the Municipality, containing the details helpful to the owners to assess the tax by themselves and a summary of the said notice shall be published in two newspapers, requesting the owners of the buildings to submit a tax return. [See Sec.233(10) and Rule 10]. 2. The return shall be filed in Form-2, and a model of the form shall be published on the Municipality's noticeboard. [See Sec.233(11) and Rule 11]. 3. The Secretary or authorised Officer shall conduct an inquiry/site inspection and assess the property tax by recording the details of the building in the property tax assessment register. [See Sec.233(13) and Rule 12]. 4. After the particulars of assessment are recorded in the property tax assessment register and in the demand register, a demand notice shall be issued to each owner of the building [See Sec.233(13) and Rule 14]. 5. While assessing the property tax, deductions/additions to the basic property tax shall be carried out on the basis of Schedules to Rule 6. [See Sec.233(7) and Rule 9]. 11. It is relevant to mention that there are no deductions or additions provided for buildings in the prime zone, while a deduction of 10% and 20% are provided for buildings in the secondary and tertiary zones respectively. Buildings on the sides of roads having a width of less than 1½ m are to be given 10% deduction and those with no public way facility with a 20% deduction. Buildings with low type roofs like those constructed with tiles, sheets, palm leaf or grass have to be given 10% deduction, while those with concrete roofs will have no deductions. Buildings between 10 and 25 years of age ought to be given a deduction of 10% while those between 25 and 50 years are entitled to a deduction of 20% and buildings of 50 years and more with a deduction of 50%. Notwithstanding the above entitlement for deductions, the total of deductions shall not exceed 75% of the basic property tax. Notwithstanding the above entitlement for deductions, the total of deductions shall not exceed 75% of the basic property tax. The above mode provided in the schedules of Rule 6 is to be adopted while fixing the annual property tax of a building in the Municipality. Issue No.(ii). Whether there are any non-compliances by Mannarkkad Municipality with the requirements of law in levying property tax and if so, whether such non-compliance would affect the levy and the consequential demand? 12. In the decision in Municipal Council Khurai and Another v. Kamal Kumar and Another , [ AIR 1965 SC 1321 ], it has been held that “Under Art.265 of the Constitution no tax shall be levied or collected except by authority of law. This clearly implies that the procedure for imposing the liability to pay a tax has to be strictly complied with. Where it is not so complied with, the liability to pay the tax cannot be said to be according to law.” The procedure adopted by the Municipality in fixing the basic property tax and in assessing the annual property tax has to be analysed in the light of the above principle. 13. It is evident from a perusal of the above stages that appropriate publications will have to be made under rule 4(2) and notification to be issued under rule 4(4) apart from public notice and newspaper publications under rule 10 of the Rules. The publication of a public notice containing details helpful to the owners of building to assess the annual property tax themselves provided under Section 233 (10) of the Act as well. Hence these procedures are mandatory. 14. In the instant case, one of the documents produced by the respondent Municipality is Ext.R1(e), which is a notification dated 27.07.2016. A reading of the above notification reveals that Mannarkkad Municipality had invited objections from respective building owners against the proposal to fix the basic property tax. No other document was initially produced. Subsequently, an additional document was produced as Ext.R1(l), which is a newspaper publication dated 11-09-2023. A reading of the above publication reveals that it is a notification under rule 4(4) of the Rules specifying the final rates of basic property tax fixed by the Council. However, the Rules mandate the notification to be published in two newspapers. Subsequently, an additional document was produced as Ext.R1(l), which is a newspaper publication dated 11-09-2023. A reading of the above publication reveals that it is a notification under rule 4(4) of the Rules specifying the final rates of basic property tax fixed by the Council. However, the Rules mandate the notification to be published in two newspapers. As per section 522 of the Act every notification, unless otherwise provided, must be published in the Gazette and the Government shall have the power to publish it in any other manner specified by them, instead of the Gazette. The publication in the noticeboard of the Municipality and in two newspapers having circulation in the area as provided in rule 4(4) of the Rules can be regarded as another manner specified by the Government for publication. Hence, such a publication is a mandatory requirement as it is required to be a replacement for a notification in the Gazette. 15. Since fixing of final rates of basic property tax is mandatory, the publication contemplated in rule 4(4) of the Rules in two newspapers apart from publication in the noticeboard of the Municipality are mandatory requirements. This flows out of section 233(10) of the Act as well and is hence a mandatory procedure. There is no material or even any averment, indicating that there was any publication of the notification fixing the basic property tax. There is also no material to indicate that any public notice or publication or even any request was made to the owners to submit returns as per rule 10(2) of the Rules. There is neither any pleading to that effect as well. 16. Though in Sonik Industries, Rajkot v. Municipal Corporation of the City of Rajkot . [ AIR 1986 SC 1518 ], it has been held that the principle of substantial compliance can be adopted in respect of the procedure that is directory, it is evident that rule 4(4) and the public notice under rule 10 of the Rules are mandatory requirements. 17. [ AIR 1986 SC 1518 ], it has been held that the principle of substantial compliance can be adopted in respect of the procedure that is directory, it is evident that rule 4(4) and the public notice under rule 10 of the Rules are mandatory requirements. 17. Apart from the above, in the decision in Subaidabi K.M v. State of Kerala ( 2024 (2) KLT 450 ), a learned Single Judge of this Court had, while considering the property tax fixed with respect to buildings in Perinthalmanna and Malappuram Municipalities observed as follows: “……….Therefore, there is no evidence before this Court to conclude that R.4(2) and R.4(4) are complied in letter and spirit based on Ext.R1(d) and R1(e). 19. After the notification under R.4(2) and R.4(4) of the Rules, 2011, as per R.10, a publication of public notice as to assessment of property tax is necessary. It is the duty of the Secretary to publish a public notice containing the details helpful to the owners of building to assess the basic property tax and annual property tax of the building by themselves. In public notice published under R.10(1), the Secretary shall demand all owners of the building to submit a tax return containing all particulars as to the building before the Secretary or the Officer authorised by the Secretary within 30 days of the publication of notice. It is also the bounden duty of the Secretary to give necessary publicity to the public notice and in summary shall be published at least in two newspapers having circulation in the area of Municipality. The public notice published by the Secretary shall be in Form - 1 appended to these Rules. Even though in the counter filed in W.P.(C). No.24090/2018, it is vaguely stated that R.10 is complied, notice in Form - 1 is not seen produced. Therefore I am of the considered opinion that Perinthalmanna Municipality has not followed the procedure prescribed in the Rules, 2011 and hence the Municipality has to be directed to redo the formalities as per the Rules, 2011 and thereafter assess the tax in accordance with law…..” 18. The situation in the present cases is also similar. Therefore I am of the considered opinion that Perinthalmanna Municipality has not followed the procedure prescribed in the Rules, 2011 and hence the Municipality has to be directed to redo the formalities as per the Rules, 2011 and thereafter assess the tax in accordance with law…..” 18. The situation in the present cases is also similar. In the absence of any material to indicate that the Mannarkkad Municipality had carried out the due procedure as required under rule 4(4) and rule 10 of the Rules read with section 233(10) of the Act, they are not entitled to demand property tax from the petitioners at the revised rates. In view of the above finding, the procedure under rule 4(4) of the Rules onwards have not been complied with by the respondent Municipality, and hence it cannot be held that basic property tax for Mannarkkad Municipality has been fixed in accordance with law as against the buildings of the petitioners. Due to the aforementioned non compliances, the levy of property tax and the consequential demand by Mannarkkad Municipality is illegal. Issue No. (iii). Whether the power under section 282 of the Act can be exercised to levy property tax from 2016-17 onwards? 19. Section 282 of the Act confers power upon the Municipality to assess, in case of escape from assessment. A reading of the said provision reveals that the power under section 282 of the Act is to assess a person who has escaped assessment in contradistinction to any amount of tax that has escaped assessment. In other words, if for some reason, a person was not assessed to tax, then the Municipality can, within a period of four years from the date on which such person should have been assessed to tax, assess such person. The power under section 282 of the Act cannot be exercised to levy any additional quantum of tax that was omitted from the assessment earlier. The power can be exercised to proceed only against persons who were wholly omitted from assessment. Hence, the Municipality cannot assess, under section 282 of the Act, persons who have already been assessed to property tax. Issue No.(iv). Whether the demand notices issued in the instant cases are barred by limitation? 20. By a notification dated 06.03.2019, Government has permitted the Municipalities to collect the property tax from 01.04.2016. Hence, the Municipality cannot assess, under section 282 of the Act, persons who have already been assessed to property tax. Issue No.(iv). Whether the demand notices issued in the instant cases are barred by limitation? 20. By a notification dated 06.03.2019, Government has permitted the Municipalities to collect the property tax from 01.04.2016. Section 237 of the Act makes the property tax and the surcharge payable thereon, including the service cess when levied, to be a first charge upon the building, land and even upon the movable property belonging to the person liable to pay the tax, subject to the prior payment of land revenue due to the Government. The said provision thus creates a charge on the land as well as the income arising from the property. Creation of a statutory charge is intended to ensure priority in the matter of recovery. In the process of recovery, in the absence of any statutory charge, the liability becomes entangled in the rights and actions created and initiated by other persons as well. It is in such circumstances that the statutory tool of creating a first charge is adopted to provide a priority for payment when recovery modes are resorted to. Such a creation of a statutory charge is not a measure of limitation period but as mentioned above, only to identify who should be given priority in payment. 21. In the year 2023, an amendment was brought in and section 538B has been incorporated in the Act, making arrears of tax to be treated as arrears of public revenue recoverable by recourse to the Revenue Recovery Act. Till the amendment, recovery of arrears of tax could have been carried out only by virtue of the provisions in the Municipality Act. It is only to overcome the limited mode of recovery available under the statute that section 538B of the Act has been incorporated enabling the Municipality to resort to the Revenue Recovery Act also for recovery of arrears of tax due to it. Merely because the arrears of tax have been treated as arrears of public revenue, the same would not extend the period of limitation. However, for the purpose of recovery of any sum of money when charged on the land, Article 62 of the Limitation Act prescribes a period of limitation of12 years. 22. Merely because the arrears of tax have been treated as arrears of public revenue, the same would not extend the period of limitation. However, for the purpose of recovery of any sum of money when charged on the land, Article 62 of the Limitation Act prescribes a period of limitation of12 years. 22. In this context, it has to be observed that section 539 of the Act stipulates that no distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in respect of any sum due to a Municipality under this Act after the expiration of a period of three years from the date on which the distraint might first have been made, suit might first have been instituted or a prosecution might first have been commenced. The proviso to the said section carves out an exemption for recovery of the amount in respect of escaped assessment under section 282 of the Act. Thus, a period of limitation of three years is provided for under section 539 of the Act. The question that begs consideration of this Court is whether, despite the creation of charge on the property enabling the Municipality to recover the arrears of tax as arrears of public revenue, the limitation period would stand extended beyond three years. 23. As per Section 29(2) of the Limitation Act, 1963, when a period of limitation is provided under a special law, the said period of limitation shall be deemed to have been incorporated as a limitation period under the Limitation Act. In the decision in Corporation of Cochin v. New India Maritime Agencies (P) Ltd. ( 2003 (3) KLT 209 ), a Division Bench of this Court considered the implication of creation of a charge on a property, in relation to the erstwhile Municipal Corporations Act and held that, despite such a charge on the property, in view of the limitation prescribed under section 417 of that Act by virtue of section 29(2) of the Limitation Act, recovery of any amount due to the Municipality will be governed by a period of three years. It was observed in the said decision as follows: “7…...While S.105 of the Act only says that a charge is created, S.417 of the Act prescribes the period of limitation for recovery of tax. Thus, according to us, the time for recovery of property tax is only three years…..” 24. It was observed in the said decision as follows: “7…...While S.105 of the Act only says that a charge is created, S.417 of the Act prescribes the period of limitation for recovery of tax. Thus, according to us, the time for recovery of property tax is only three years…..” 24. Thus despite the provisions of the Limitation Act stipulating a period of limitation of 12 years for recovery of the amounts due, when it is a charge on the property, the period of limitation stipulated in the special statute will have to be given preference and the same will prevail over the general period prescribed under the Limitation Act. As mentioned earlier, neither section 538B nor section 237 of the Act extends the period of limitation for recovery of amounts due to the Municipality. The creation of a charge on the property as well as the recovery of arrears of tax as an arrear of public revenue would not extend the limitation period prescribed under section 539 of the Act and the Municipalities are governed by the said provision. Viewed in the above perspective, the Municipality could have recovered only amounts as arrears for a period of three years. 25. Apart from the above, even the Government had understood section 539 of the Act as restraining recovery of arrears beyond three years, as is noted from the Government Order dated 06.03.2019. Though the interpretation of the Government cannot be regarded as the law of the land, in view of the discussion in the preceding paragraphs, the view is legally tenable. 26. Thus, even if the demand notices were valid still the recovery under those demand notices could not have been initiated for arrears beyond three years from the date of demand. Issue No.(v). Whether the Government Order dated 18-05-2024, cancelling resolution No. 17 dated 16-09-2023 and resolution No. 1 dated 04-10-2023 is valid? 27. Though in W.P.(C) No. 10139/2025, petitioner has challenged the Government Order dated 18-05-2024, cancelling Resolution No.17 dated 16-09-2023 and Resolution No.1 dated 04-10-2023 of the Mannarkkad Municipality, since the demand notices were issued against the petitioner has been initiated on the basis of an assessment carried out, without complying with the procedure fixed by law, those questions have become academic in nature and need not be considered at this stage at least. The question relating to the retrospective demand has become irrelevant since the demand notices are without any legal basis. Hence the above mentioned question is left open as far as the Mannarkkad Municipality is concerned. 28. In the result, the demand raised against the petitioners in all these cases through the respective demand notices shall stand quashed. The property tax assessment shall be redone as per the procedure prescribed under law from the stage at which it has been found to be contrary to law. The writ petitions are allowed as above.