Kerala High Court Quashes Penalty Tax Post-Regularisation of Building | Says Once Unauthorized Construction Is Legalised, Higher Levy Cannot Be Imposed
Safiya Malik
The High Court of Kerala Single Bench of Justice Ziyad Rahman A.A. quashed the imposition of property tax at double the normal rate for a period after the building in question had been regularized and granted an occupancy certificate. The Court held that the imposition of such enhanced tax beyond the date of regularization was legally unsustainable and directed the municipal authorities to rework the tax demand accordingly. The final directive clarified that any additional amount collected post-regularization must be adjusted against future tax liabilities.
The petitioners, residents of Kannur district, are joint owners of a building bearing Door Nos. 2232A to 2232D, located within the jurisdiction of the Iritty Municipality. The property had previously been the subject of a dispute regarding unauthorized construction. A notice dated 11.01.2016 was issued by the Iritty Municipality alleging unauthorized construction, which the petitioners replied to on 05.02.2016.
Following the issuance of notices and legal proceedings, the dispute was ultimately resolved when the Government of Kerala passed an order on 11.02.2022, directing the regularization of the building. In compliance, the Town Planner issued an order on 25.05.2022, and the Municipality subsequently issued an occupancy certificate on 28.05.2022. The said certificate stated the date of completion as 05.06.2000, while the occupancy was recognized from 28.05.2022.
Subsequent to the regularization, the petitioners received notices demanding property tax along with a penalty at twice the normal rate for the years 2016-17, 2021-22, and 2022-23. The Government later intervened and limited the demand to the period starting from 2019-2020. In response, the Iritty Municipality issued a revised demand on 22.02.2023, seeking tax at triple the normal rate for the period from 2019-20 to 2022-23.
The petitioners contended that they had already remitted the demanded amount but later sought exemption from penal charges and refund of excess amounts through a representation submitted in March 2023. Due to the lack of response from the authorities, they approached the High Court seeking judicial intervention.
The reliefs sought included a writ of certiorari to quash the tax demand notice (Exhibit P15) to the extent it imposed penalty and time-barred tax, a declaration against treating the building as unauthorized post-regularization, and a mandamus directing the authorities to revise the levy and refund any excess collected.
The respondents filed a counter affidavit contesting the claims and justifying the tax demands. The matter came up for admission before the Court on 16 July 2025.
The Court recorded that one of the primary contentions raised was that, "since Ext.P12 would indicate that the building is regularized with effect from 28.05.2022, it was not proper for the respondents 2 to 4 to demand tax, double the rate along with the regular rate of tax, pertaining to the period after the said date."
It further observed that, "Ext.P15 is the demand notice issued based on Ext.P14. But in the said notice, while demanding tax at the rate of two times in addition to the normal rate, the demand was made for the period pertaining to 2022-2023 as well, which period is after the date of regularization."
The Court held that once a regularization has come into effect, the building cannot be considered unauthorized for any period thereafter. It stated, "It is evident that once a regularization came into effect, the liability of the petitioners is to pay the tax at the regular rate, as the said building cannot be treated as unauthorised for that period."
On the date of regularization, the Court noted, "In this case, it is evident that the building was regularized on 28.05.2022. Therefore, the 2nd respondent Municipality could not have imposed two times of the normal tax along with regular rate of tax for a period after 28.05.2022."
The writ petition was disposed of with specific directions to the respondents. The Court ordered that the demand made in Exhibit P15, to the extent it levied property tax at double the normal rate for any period after 28.05.2022, be quashed.
It further directed, "The 2nd and 3rd respondents shall rework the demand made in Ext.P15, in tune with the observations made by this Court in this judgment and fix the liability of the petitioner."
Regarding the amounts already paid, the Court stated, "Additional amount, if any, collected from the petitioner pertaining to the period as referred to above, the same shall be adjusted in the amounts payable by the petitioner as tax in future for the said building."
Advocates Representing the Parties:
For the Petitioners: Sri. K. Praveen Kumar, Advocate
For the Respondents: Smt. Deepa K.R, Special Government Pleader; Sri. P.K. Ravisankar, Standing Counsel for Iritty Municipality
Case Title: Koovatt Laila and Another v. State of Kerala and Others
Neutral Citation: 2025: KER:52511
Case Number: WP(C) No. 21495 of 2024
Bench: Justice Ziyad Rahman A.A.
