Corporation cannot levy penalty for unauthorized occupation of building unless there is specific legal provision: Kerala High Court

The Kerala High court recently held that when a building is lawfully constructed but occupied without proper permits from the Corporation, it will not attract tax or penalty under Section 242 (levying of tax on the building constructed unlawfully) of the Kerala Municipality Act of 1994 [Dr P J Joy & Anr v The Corporation of Kochi & Anr]..Chief Justice A J Desai and Justice VG Arun ruled that construction of a building and its occupation are not the same.The Corporation cannot levy tax over a lawfully constructed building when there is no specific provision about penalties for unauthorised occupation of the same, the Court made it clear.."When we raised a query to the learned standing counsel for the Corporation about the specific provision enabling levy of penalty for unauthorised occupation, he could not bring to our notice any such provision either in the Act or in the Rules, other than Section 242 of the Act. In this context, we also take note of Article 265 of the Constitution of India which stipulates 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 which was sanctioned and construction was completed in 2011. Despite submitting required certificates, the occupancy certificate was not issued by the Corporation.Instead, the Corporation demanded property tax and penalty under Section 242 of the Act in 2012. The appellants objected, leading to an order in April 2012 directing them to pay the tax and penalty as provided under Section 242 of the Act. This order came to be challenged by the appellants before the High Court. .A single-judge of the High Court refused to entertain the writ petition given the alternative remedy available to the appellants under Section 509 of the Act.This led to the appeal before the Division Bench. .The appellants submitted before the Division Bench that penalties apply only when a building is unlawfully constructed. However, Standing Counsel for the Corporation contended that a building should be considered unlawfully constructed if it is occupied without proper certificates, even if its construction is completed according to proper permits..The Court having noted that the Corporation had previously accepted the lawful construction of the building, clarified that Section 242 of the Act would only apply to unlawfully constructed or reconstructed buildings and not to unauthorised occupation of a building, Thus, the Corporation would be prevented from levying tax or penalty..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, only to levy property tax.."We take note of Section 233 of the Act which empowers the Corporation to levy the property tax on every building, except those which are exempted as per the provisions of the Act," the Court said..The appellants were represented by Senior Advocate Kurian George Kannanthanam and advocate Tony George Kannanthanam.Advocate K B Arunkumar appeared for the Corporation..[Read Order]