IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 5TH AUGUST, 2008/14TH SRAVANA, 1930 O.P. NO. 2411 of 1999 PETITIONER: ------------------ T.A. SIMON, THAIKKKADAM HOUSE, MANGALAM, WADAKKANCHERRY, THRISSUR. BY ADVS. SRI. JOSEPH MARKOS & SRI. THOMAS VELLAPPALLY. RESPONDENTS: --------------------- 1. THE TAHSILDAR, TALAPPILLY. 2. THE STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT OF KERALA, THIRUVANANTHAPURAM. BY SR. GOVT. PLEADER SRI. MUHAMMED RAFIQ. THIS ORIIGINAL PETITION HAVING BEEN FINALLY HEARD ON 22/07/2008 ALONG WITH O.P. NOS.36075/2001 AND 10835/2003, THE COURT ON 05/08/2008 DELIVERED THE FOLLOWING: O.P.No.2411 of 1999 APPENDIX PETITIONER'S EXHIBITS: Ext.P1: True copy of assessment order dated 27.8.1993. Ext.P2: True copy of demand notice dated 27.8.1993 Ext.P3: True copy of notice dated 6.8.1997. Ext.P4: True copy of judgment dated 16.7.1998 in O.P.No.16298/97. Ext.P5: True copy of objections filed by the petitioner's counsel. Ext.P6: True copy of order dated 23.10.1998. Ext.P7: True copy of assessment order dated 14.1.1999. Ext.P8: True copy of demand notice dated 14.1.1999. H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- O.P.Nos.2411 of 1999, 36075 of 2001 and 10835 of 2003 ------------------------------------ Dated this, the 5th day of August, 2008 JUDGMENT H.L. DATTU, C.J. The vires of Section 5(4) of the Kerala Building Tax Act, 1975 hereinafter for the sake of brevity referred to as Act, 1975, is called in question by the petitioners in these Original Petitions, on the ground, that, the sub-section is, arbitrary, excessive and violative of Article 14 of the Constitution of India. 2. The facts in O.P.No.2411 of 1999 may be noticed for the purpose of disposal of these Original Petitions. The petitioner had completed the construction of a non-residential building in Survey No.333, in Kumaranelloor Village, Wadakkumcherry. It had only a ground floor. After completion of the construction of the building, the revenue authorities had assigned Building Nos. VII/1060 to 1067. The competent authority under the Act has assessed the building and has levied tax in a sum of Rs.12,000/- on a plinth area of 245.77 sq mts. under Section 9(3) of the Act by an order passed on 27.8.1993. Subsequently, petitioner has made major improvement of the building by constructing two more floors to the building. That was in the year 1997. The competent authority under the Act, has passed fresh assessment order under Section 5(4) read with Section 9 (3) of the Act and has quantified the tax liability OP Nos.2411/99 etc. - 2 - in a sum of Rs.1,90,800/- on a plinth area of 801.962 sq.mts. and has issued fresh demand notice in a sum of Rs.1,78,800/- after giving deduction to the tax already paid in a sum of Rs.12,000/-. 3. The facts in the other cases also are more or less identical. Apart from questioning the correctness or otherwise of the assessment orders passed under the Act, the petitioner's prayer in the Original Petition is to declare, that, Section 5(4) of the Act in so far as it authorises the reassessment of buildings already completed and assessed under the Act as unconstitutional. 4. We have heard Sri.Joseph Markose, learned Senior Counsel, and Sri. Abdul Rahim for the petitioners and Sri.Mohamed Rafiq, learned Government Pleader for the State. 5. The learned Senior Counsel Sri.Joseph Markose would contend, that, the ground floor having been assessed to tax in the year 1993, it is not open to the respondent authority to reassess the same at revised rates, merely because an additional floor has been constructed; it is settled law that the completion of the building is the important date for quantification of tax under the Act; the intent of the Act is to levy tax on building, but not to assess the same building every time whenever there is an addition made to the building. 6. The learned Senior Counsel would further contend, the charging provisions of the Act is attracted on completion of the construction of the OP Nos.2411/99 etc. - 3 - building and in the instant case, the ground floor having been constructed and assessed to tax in the year 1993, itself, it is not open to the assessing authority to assess the same again when any extension or addition is made to the building and that would amount to double taxation. 7. In so far as the vires of sub-section (4) of Section 5 of the Act, the learned Senior Counsel would submit, Section 5(4) in so far as it authorises a reassessment of a building already completed and assessed to tax is unconstitutional, arbitrary and against the avowed intent of the legislature. It is further contended that Section 5(4) should not be read as permitting reassessment of a completed building. According to the learned counsel, either the area already assessed should be deducted from the total plinth area of the building or credit should be given for tax on the area already assessed at the revised rates. Lastly, it is contended that, under Section 5(4) of the Act, which deals with buildings completed after the appointed date, the completed buildings is again assessed along with the additional construction. Therefore, Section 5(4) in so far as it authorises reassessment of buildings already completed/assessed is arbitrary, discriminatory and violative of Article 14 of the Constitution of India. Reliance is placed on the observations made in the case of Mahamood vs. Tahsildar, 2000(2) KLT 512, Kurian George vs. Tahsildar 1995(2) KLT 457 and Gopalakrishnan vs. Tahsildar, 1995(2) KLT 37. OP Nos.2411/99 etc. - 4 - 8. Sri. Abdul Rahim, learned counsel for the petitioner in O.P.No.10835/2003, while adopting the submissions made by learned Senior Counsel, Sri.Joseph Markose, would further submit, that, the Act does not provide for re-opening, re-assessment or revision of the completed assessment under the Act and therefore, the assessing authority under the Act could not have assessed the same building which was already assessed to tax, merely because, the petitioner has made some addition to the completed building which has already been assessed to tax under the Act. The learned counsel would further submit that the re-assessment of that portion of the building which is already assessed to tax under the Act is impermissible and if the same is provided in sub-section (4) of Section 5 of the Act, the same is arbitrary and violative of Article 14 of the Constitution of India. It is further contended that the completion of the building is the taxable event and once the building is assessed to tax, the same portion of the building cannot be taken into consideration while calculating the total plinth area of the building and the same would amount to double taxation. Lastly, the learned counsel would submit that, the provision in Section 5(4) of the Act, providing for deduction of tax already paid from the total tax payable on the combined plinth area is arbitrary and violative of Article 14 of the Constitution of India and against all canons of Tax Jurisprudence and therefore, violative of Article 265 of the Constitution of India. OP Nos.2411/99 etc. - 5 - 9. Sri. Mohammed Rafiq, learned Government Advocate for the Revenue, while sustaining the impugned legislation would submit, that, the legal issues urged and argued by the learned counsels for the petitioners is no more res integra, in view of the decision of the Full Bench of this Court in the case of Sundari Bai Alias Radha Bai vs. State of Kerala, 1978 KLT 931, which decision has been affirmed by the Apex Court in the case of D.G.Gose and Company vs. State of Kerala and another, (1980) 2 SCC 410. 10. The issue which arise for our consideration and decision is, whether Section 5(4) of the Kerala Building Tax Act is invalid on the ground, that, it is arbitrary, excessive and violative of Article 14 of the Constitution of India? 11. The title given to the Act is the Kerala Building Tax Act, 1975. It is claimed to be an Act to provide for the levy of tax on buildings. The preamble of the Act suggests, that, it was enacted because it was found expedient to provide for the levy of tax on buildings and luxury tax on certain residential buildings. The Act is made applicable to the whole of the State of Kerala and the Act is deemed to have come into force on the 1st day of April, 1973. Several amendments have been introduced in the Act, by Act 6 of 1981, Act 1 of 1991, Act 3 of 1992, Act 13 of 1993, Act 23 of 1996 and Act 23 of 1999. The Act defines the meaning of the expression 'appointed day' to mean, such date as the OP Nos.2411/99 etc. - 6 - Government may for the purpose of this Act, specify by notification in the Gazette. The Act 3 of 1992 published in the gazette dated 1.4.1992, is given effect to from 10.2.1992. Section 2(c) of the Act defines the “assessee” to mean, a person by whom building tax or any other sum of money is payable under the Act and includes every person in respect of whom any proceedings under the Act has been taken for the assessment of building tax payable by him. Section 2(e) defines 'building' to mean, a house, garage, or any other structure or part thereof, whether masonry, bricks, wood, metal or other material, but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass or thatched or thatch or a latrine which is not attached to the main structure. Section 2 (h) defines “major repair or improvements” in respect of a building to mean, a repair or improvement as a result of which the plinth area of the building is increased. Section 2(k) defines the meaning of the expression 'plinth area' to mean, the area included in the floor of building and where a building has more than one floor the aggregate area included in all the floors together. Proviso appended to sub-section may not be necessary to be noticed for the purpose of disposal of these Original Petitions. 12. Section 3 is an exemption clause and it provides exemption to certain buildings which are enumerated in the Section itself. OP Nos.2411/99 etc. - 7 - 13. Section 5 of the Act is the charging provision. Sub-section (1) provides for levying building tax based on the plinth area at the rates specified in the Schedule on every building, the construction of which is completed or or after the appointed day. In the section the word 'charged' refers to imposition of tax on every building, the construction of which is completed on or after the appointed day, based on the plinth area of the building. The unit of taxation is the building. The base or the measure is the plinth area of the building. It may not be necessary to refer to sub-sections (2) and (3) of Section 5 of the Act, since they are not under challenge in these original petitions. Since the entire controversy revolves on the interpretation of sub-section (4) of Section 5 of the Act, the same is extracted:- “(4). Where the plinth area of the building, the construction of which is completed after the appointed day, is subsequently increased by new extensions or major repair or improvement, building tax shall be computed on the total plinth area of the building including that of the new extension or repair or improvement and credit shall be given to the tax already levied and collected, if any, in respect of the building before such extension or repair or improvement.”. 14. Sub-section (6) says that, the building tax is payable by the owner of the building. The explanation appended to the section says that for the OP Nos.2411/99 etc. - 8 - purpose of the Act, the construction of a building shall be deemed to have been completed when it is ready for occupation or has been actually occupied, whichever is earlier. 15. Section 6 of the Act provides for determination of the plinth area of a building. The plinth area of a building for the purpose of the Act, is the plinth area of the building as specified in the plan and approved by the competent authority under the Act. 16. Section 7 of the Act provides for return of completion etc. of buildings, Section 8 of the Act provides for return after due date and amendment of return, Section 9 of the Act provides for assessment of tax under the Act, Section 10 provides for notice of demand, Section 11 provides for appeals, Section 14 provides for revision by the State Government, Section 15 speaks of rectification of mistakes, Section 26 authorises the State Government to make rules for the purposes of the Act. 17. The rates of building tax prior to and after amendment has some relevance for the purpose of disposal of these original petitions. The rates are specified in the Schedule appended to the Act. They are as under:- After the amendment, the rates of building of building tax is as follows: OP Nos.2411/99 etc. - 9 - ------------------------------------------------------------------------------------------------- Grama Panchayat Special Grade other than Special Grama Panchayat/ Plinth Area Grade Grama- Town Panchayat/ Municipal Panchayat Municipal Council Corporation (Rupees) (Rupees) (Rupees) ------------------------------------------------------------------------------------------------------------------------------ (1) (2) (3) (4) ------------------------------------------------------------------------------------------------------------------------------ Residential Buildings:- Not exceeding 100 square metres Nil Nil Nil Above 100 square metres but not exceeding 150 square metres 750 1350 2025 Above 150 square metres but not exceeding 200 square metres 1500 2700 4050 Above 200 square metres but not 3000 5400 8100 exceeding 250 square metres Exceeding 250 square metres 3000 plus Rs.600 Rs.5400 plus Rs.1200 8100 plus Rs.1500 for every additional for every additional for every additional 10 square metres 10 square metres 10 square metres Other Buildings:- Not exceeding 50 square metres Nil Nil Nil Above 50 square metres but not exceeding 75 square metres 750 1500 3000 Above 75 square metres but not exceeding 100 square metres 1125 2250 4500 Above 100 square metres but not exceeding 150 square metres 2250 4500 9000 Above 150 square metres but not 4500 9000 18000 exceeding 200 square metres Above 200 square metres but not exceeding 250 square metres 9000 18000 27000 Exceeding 250 square metres 9000 plus Rs.900 Rs.18000 plus Rs.1800 27000 plus Rs.2250 for every additional for every additional for every additional 10 square metres 10 square metres 10 square metres ---------------------------------------------------------------------------------------------------------------------------------------------- OP Nos.2411/99 etc. - 10 - Prior to the amendment, the rate of tax is as under:- -------------------------------------------------------------------------------------------------- Special Grade Grama Panchayat/ Plinth Area Panchayat Municipalities Corporations (Rupees) (Rupees) (Rupees) ------------------------------------------------------------------------------------------------------------------------------ (1) (2) (3) (4) ------------------------------------------------------------------------------------------------------------------------------ Residential Buildings:- On the first 75 square metres Nil Nil Nil Above 75 square metres but not exceeding 100 square metres (i) In the case of buildings thatched by grass or leaves Nil Nil Nil (ii) In other cases 250 450 675 Above 100 square metres but not exceeding 150 square metres 500 900 1350 Above 150 square metres but not exceeding 200 square metres 1000 1800 2700 Above 200 square metres but not 2000 3600 5400 exceeding 250 square metres Exceeding 250 square metres 2000 plus Rs.400 3600 plus Rs.800 5400 plus Rs.1000 for every additional for every additional for every additional 10 square metres 10 square metres 10 square metres Other Buildings:- On the first 50 square metres 250 500 1000 Above 50 square metres but not exceeding 75 square metres 500 1000 2000 Above 75 square metres but not exceeding 100 square metres 750 1500 3000 Above 100 square metres but not exceeding 150 square metres 1500 3000 6000 Above 150 square metres but not 3000 6000 12000 exceeding 200 square metres OP Nos.2411/99 etc. - 11 - Above 200 square metres but not exceeding 250 square metres 6000 12000 18000 Exceeding 250 square metres 6000 plus Rs.600 Rs.12000 plus Rs.1200 18000 plus Rs.1800 for every additional for every additional for every additional 10 square metres 10 square metres 10 square metres ---------------------------------------------------------------------------------------------------------------------------------------------- 18. The origin of the Act commences with Building Tax Act of 1961, which provided for imposition of building tax on uniform basis depending on the floorage or the plinth area of the building. This levy of tax was struck down by this Court and it has become final by the pronouncement of the Apex Court. The Act was replaced by the Kerala Building Tax Act, 1975. The said Act was questioned before this Court in the case of Sundari Bai Alias Radha Bai, on the ground that the same is violative of Articles 14 and 19 of the Constitution of India and also of Article 301 of the Constitution of India. Section 5 of the Act therein was the charging provision, which provided for levy of tax on the capital value of the building. Sub-section (4) of Section 5 of the Act, provided that where the capital value of the building which has already been taxed under the Act is increased by more than ten thousand rupees by new construction or additions or combination or as result of repairs or improvements, building tax shall be computed on the capital value of the building including that of the new constructions or additions or combinations or as the case may be, of the building as to be repaired or improved and credit shall be given to the tax already levied. OP Nos.2411/99 etc. - 12 - 19. The Full Bench of this Court, after a detailed discussion has upheld the constitutional validity of the Act. In the earlier legislation, which came up for consideration before this Court, the levy of building tax was on the construction of buildings completed on or after the 1st April, 1973, the capital value of which exceeds 20,000/- rupees. Section 5(4) therein was similar to the impugned section in these proceedings, except the mode/measure of levy is now changed from 'capital value” of the building to the “plinth area” of the building. The entire Act and in particular the charging provisions is upheld by a Full Bench of this Court and the view expressed by this Court is also affirmed by the Apex Court. One of the observations made by the full bench of this Court in Radha Bai's case is, “the underlying basis of tax under the Act is on sound and well accepted principle of taxation. We are not satisfied that the tax can be objected to on the ground that it is excessive or oppressive or that it mounts a harsh and crushing burden on the camel's back”. 20. Section 5 of the Act is the charging provision under the Act. The tax (building tax) under the Act is charged on every buildings, the construction of which is completed on or after the appointed day, based on the plinth area at the rates specified in the Schedule appended to the Act. The Apex Court while explaining the amplitude of Article 265 of the Constitution in OP Nos.2411/99 etc. - 13 - Govind Saran Ganga Saran vs. S.T.Commissioner, AIR 1985 SC 1041, has stated “that the components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event, attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law”. 21. In the present case, the charging provision under the Act, provides for all the components that requires for the purpose of levying building tax under the Act. The charge is on the building. It is the owner of the building who is liable to pay tax under the Act. The rate of tax is as prescribed in the Schedule appended to the Act and the measure or the value to which the rate will be applied for computing the tax liability is on the plinth area of the building, the construction of which is completed on or after the appointed day. Therefore, the charging provision has all the ingredients which enter into the concept of a tax. 22. The Act provides a machinery for quantification of the charge and for collection of tax assessed. In the Act, there are provisions for appeal and OP Nos.2411/99 etc. - 14 - revision. The Act confers on the Government the power to make rules to carry out the purpose of the Act. 23. Now, let us analyse Section 5(4) of the Act, which is impugned in these petitions. i. The building completed after the appointed date, that is, 10.2.1992, is assessed, tax levied and collected on the plinth area of the building. ii. Subsequently, if the plinth area of the building is increased by new extensions, or major repairs, the building tax shall be computed on the total area of the building including that of the new extension or major improvement or major repair. 24. The rate of building tax was enhanced by Act 3 of 1992, with effect from 10.2.1992. Subsequently, by the Kerala Finance Act, 1996 (Act 23 of 1996) the building tax is enhanced with effect from 29.7.1996. These rates are made applicable to such of those buildings which are completed on or after 10.2.1992. The Schedule provides the graded rate of tax depending on the plinth area of the residential and non-residential buildings. If the plinth area of the building is less than 100 sq.metres, whether it is situate in Grama Panchayat area, Special Grade Grama Panchayat/Town Panchayat/Municipal Council or in Municipal Corporation, the rate of tax is nil. However, if the plinth area exceeds 100 sq. metres but does not exceed 150 sq. metres depending on the location of OP Nos.2411/99 etc. - 15 - the building, a particular rate of tax is made applicable, so on and so forth. That only means the rate of tax on the building both residential and non-residential would depend on the total plinth area of the building and its location. It is in the nature of the graded rate of tax depending on the total or aggregate plinth area of the building. 25. The petitioners and their learned counsels' primary contention appears to be, once the building is assessed after its completion based on the plinth area of the building, and subsequently, even if major repair or improvement is made to the existing structure, what requires to be assessed is only the new repairs/extension/improvement, otherwise it would amount to assessing the building which was already assessed and this would amount to double taxation and secondly, re-assessment of the building is impermissible in law. There is fallacy in the argument canvassed by the learned counsel for the petitioner. The charging provision provides for levy of tax on the building based on the plinth area of the building. There may be a possibility that the plinth area of the building may not be varied by the owner of the building and in such cases question of payment of any further tax would not arise. But, if the owner of the building makes improvement, or extension or major repair and if by that improvement, the total plinth area of the building increases, the fresh assessment for the purpose of building tax requires to be made. Otherwise, it would be OP Nos.2411/99 etc. - 16 - contrary to the charging provisions itself. The graded rate of tax is provided in the Schedule. The Schedule has been amended once by Act 3 of 1992 and for the second time by Act 23 of 1996. Each building requires to be assessed on the plinth area of the building. Let us take the case of a building in a Municipal Corporation area having a