Kerala High Court annuls building tax assessment for non-compliance with mandatory exemption reference procedure

Background of the dispute

VPK Motors Pvt. Ltd Vs State of Kerala came before the Kerala High Court as a challenge to the building tax assessment levied on a commercial property used for a Toyota dealership. The assessee owned a building housing a showroom, workshop, and service centre for Toyota vehicles.

The central issue was whether this building could obtain exemption from building tax under Section 3(1)(b) of the Kerala Building Tax Act, 1975, and whether the statutory authorities were legally required to refer the exemption question to the Government under Section 3(2) instead of deciding it themselves.

An assessment order determined a building tax liability of Rs.31,52,700/-. While disputing this liability, the assessee simultaneously approached the Government seeking exemption under Section 3(1)(b). Parallelly, the assessee filed a writ petition against the assessment, which was disposed of by directing the assessee to exhaust the statutory appellate remedy.

Assessment and appellate proceedings

Initial assessment

  • The 4th respondent–Tahsildar issued an assessment order (Ext.P1) under the Kerala Building Tax Act, 1975, fixing the building tax at Rs.31,52,700/-.
  • The assessee claimed that the building was primarily used as a workshop and service establishment, qualifying it as a factory/workshop for the purpose of exemption under Section 3(1)(b).
  • Before the Government, an application for exemption was submitted (Ext.P2), requesting that the building be treated as exempt from building tax.

High Court’s earlier direction to pursue appeal

The assessee initially approached the High Court through W.P.(C). No.9033/2021 against the assessment. The Court, however, did not examine the merits of the assessment at that stage and, via Ext.P5 order, directed the assessee to avail the statutory appellate mechanism under the Act.

Decision of the appellate authority

Pursuant to the High Court’s direction, the assessee filed an appeal before the 3rd respondent (Ext.P6). The appellate authority dismissed the appeal essentially on a factual premise:

  • It noted that the plinth area functioning as a showroom exceeded the space used as a workshop.
  • Relying on this area-based conclusion, the authority held that the principal use of the building was not as a factory or workshop.
  • On this reasoning, the authority concluded that exemption under Section 3(1)(b) was not available and upheld the assessment.

Revisional proceedings and their outcome

Revision before the 2nd respondent

The assessee then invoked the revisional jurisdiction of the 2nd respondent (Ext.P7), challenging the appellate order (Ext.P6).

The revisional authority disposed of the revision as per Ext.P9, taking the view that:

  • Only the Government was competent to decide whether the assessee’s building qualified for exemption under Section 3(1)(b).
  • On that ground, the revisional authority declined to entertain the assessee’s contentions on exemption at all.

However, despite recognising that the Government alone could decide on exemption, the revisional authority did not refer the matter to the Government, nor did it facilitate such a reference. The revision was effectively rejected without any concrete action being taken on the exemption claim.

It was in this backdrop that the assessee once again approached the Kerala High Court through the present writ petition, challenging:

  • The assessment order (Ext.P1),
  • The appellate order (Ext.P6), and
  • The revisional order (Ext.P9).