Property Tax Can't Be Levied Without Following Statutory Assessment Procedure U/S 233 Of Kerala Municipality Act: High Court

Section 233 of the Kerala Municipality Act, 1994, deals with the levy of property tax by the Municipality on buildings and lands within its area. This section outlines the process of assessment and collection of property tax, specifying that it should be levied in accordance with the Act and prescribed rules.

Justices A.K. Jayasankaran Nambiar and P.M. Manoj stated that without complying with the procedural formalities required to bring the rate of tax and the measure of tax to the knowledge of the prospective assessees, the levy of property tax cannot be seen as having come into existence vis-a-vis those assessees.

The challenge in the writ petitions against the demand for arrears of property tax by the appellant Municipality was that the demand notices were issued without assessing the basic property tax and annual property tax as per the mandatory procedure prescribed under Section 233 of the Kerala Municipality Act read with the Kerala Municipality (Property Tax, Service Cess and Surcharge) Rules, 2011 and in particular, Rules 4 and 10 of the 2011 Rules; and

The assessee submitted that in the light of the documents produced before the Single Judge, that clearly showed compliance with the procedure contemplated under Rule 4(2) of the 2011 Rules, the appellant Municipality had to be seen as having substantially complied with the requirements under Section 233 of the Kerala Municipality Act and Rules.

The bench after looking into Rule 10 of Kerala Municipality (Property Tax, Service Cess and Surcharge) Rules, 2011 observed that the procedure for assessment of property tax can begin only with the filing of a return pursuant to the publication of a notice under Rule 10, which contains details helpful to the owners of buildings to assess the basic property tax and annual property tax of the buildings by themselves.

The bench opined that it is only if the owners of the buildings fail to file their returns within 30 days of that notice that the Municipality can proceed to unilaterally collect the details necessary for an assessment and complete the assessment against the owners of buildings.

The bench agreed with the Single Judge and stated that in the absence of a valid levy, there could not have been an assessment to tax, or a collection of the said tax, since the mandate of Article 265 of the Constitution requires both the levy and collection of tax to be backed by the authority of law.

Since there was no effective levy of tax, the contention of the appellant Municipality that the respondents had an effective alternate remedy by way of an appeal against the assessment orders, pales into insignificance, added the bench.

The bench opined that the appellate remedy being against assessments irregularly completed, and not against nonest assessments, cannot be seen as an efficacious alternate remedy on the facts and circumstances arising in these appeals.

In view of the above, the bench dismissed the appeal.

Case Title: Perinthalmanna Municipality v. Abdul Kareem

Case Number: W.A.NO.1090 OF 2024

Counsel for Appellant/Assessee: P.C. Sasidharan

Counsel for Respondent/Department: Peeyus A. Kottam

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