The company cannot impose penalty for unauthorized occupancy of premises unless there is a specific legal provision: Kerala High Court

The High Court of Kerala recently held that where a building is legally constructed but occupied without proper permissions from the Corporation, no tax or penalty shall be levied under Section 242 (imposing tax on the unlawfully constructed building) of the Kerala Municipality Act, 1994 (Dr. PJ Joy & Anr v The Corporation of Kochi & Anr).

Chief Justice AJ Desai and Justice VG Arun ruled that the construction of a building and its occupancy are not the same.

The Corporation cannot levy tax on a lawfully constructed building in the absence of any specific provision for penalties for unauthorized occupancy thereof, the Court made clear.

“When we posed a query to the learned Standing Counsel for the Corporation regarding the specific provision allowing imposition of penalty for unauthorized occupancy, he could not bring to our notice any such provision either in the Act or in the Rules, with exception from section 242 of the Act. Action. In this context, we also note Article 265 of the Constitution of India which provides that no tax shall be levied or collected except by authority of law.the Court added.

The appellants had applied for the construction of a hospital building, for which sanctions were imposed and the construction was completed in 2011. Despite submitting the required certificates, the occupancy certificate was not issued by the company.

Instead, in 2012, the Corporation demanded property tax and penalty under Section 242 of the Act. The appellants objected, leading to an order in April 2012 directing them to pay the tax and penalty as provided for in section 242 of the Act.

This order was challenged by the appellants in the High Court.

A single judge of the High Court refused to entertain the petition considering the alternative remedy available to the appellants under Section 509 of the Act.

This led to an appeal to the Division Bench.

Appellants have argued before the Division that sanctions only apply if a building has been constructed unlawfully.

However, the Corporation’s Standing Counsel stated that a building should be considered unlawfully constructed if it is occupied without proper certificates, even if its construction has been completed in accordance with proper permits.

After noting that the Corporation had previously accepted the lawful construction of the building, the Court clarified that section 242 of the Act would apply only to unlawfully constructed or reconstructed buildings and not to unauthorized occupation of a building.

For example, the company would not be able to levy any tax or fine.

The Court, therefore, allowed the appeal and quashed the demand for tax and penalty and directed the Corporation to issue a notice under Section 233 (Description and Classes of Property Tax) of the Act solely for the purpose of levying property tax.

“We to take note of Article 233 of the law, which gives the company the power to levy real estate tax on any building, except on buildings exempt under the provisions of the law,“, the Court said.

The appellants were represented by Senior Advocate Kurian George Kannanthanam and Advocate Tony George Kannanthanam.

Advocate KB Arunkumar appeared for the Corporation.