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Gram Panchayat Cannot Levy Property Tax in KIADB Areas Without Notification:
The has decisively ruled that Gram Panchayats lack the authority to impose property tax on industrial units located within notified industrial areas of the unless the issues a formal notification under of the KIAD Act, 1966. Justice Sachin Shankar Magadum, presiding over a batch of over two dozen writ petitions, quashed demand notices issued by the to companies including Kalpatharu Breweries, Big Bags Bangalore, and Narmada Pipe Industry, among others.
A Question of Jurisdiction
At the heart of the dispute was whether a local body like a Gram Panchayat could step into the fiscal domain of an industrial estate specifically created and maintained by the KIADB. The petitioners, all industrial units in the Sompura Industrial Area, challenged the Panchayat’s demand warrants, arguing that the Panchayat had no jurisdiction. They relied on , which collectively vest exclusive control over planning, development, and revenue in the KIADB until the area is formally withdrawn through a government notification.
The Missing Notification
The court noted a critical fact: no notification under of the KIAD Act has ever been issued to withdraw the Sompura Industrial Area from KIADB’s ambit. “In view of the admitted position that no notification has been issued under of the KIAD Act… the jurisdiction of respondent – Gram Panchayat to levy property tax simply does not arise,” Justice Magadum observed. The absence of this procedural step rendered the Panchayat’s demand notices “ultra vires and void.”
The KIAD Act is a special legislation that overrides general laws like the Panchayat Raj Act. gives it overriding effect, and clarifies that any local body’s expenses in the area are discretionary, not automatic. “The Gram Panchayat or any other local body has no automatic right to impose or recover taxes from units within industrial areas unless specifically authorized by the KIADB or through statutory mechanism,” the judgment stated.
Schedule-IV and the ‘Subject to Notification’ Clause
The Panchayat sought to justify its action under , as amended in 2015, which lists property tax on industries in KIADB areas. However, the court interpreted the Schedule’s language carefully. “The phrase ‘subject to notification’ is a legislative condition precedent and must be interpreted harmoniously with the provisions of the KIAD Act, particularly ,” the court held. Without such notification, the Panchayat cannot unilaterally impose tax.
Reliance on Precedents and Circulars
The Gram Panchayat cited earlier coordinate bench rulings in and and a government circular from 2019. The court distinguished these, noting that those judgments did not examine the interplay between the KIAD Act and the Panchayat Raj Act. Moreover, a later circular dated 16 July 2024 from the clarified that only KIADB has authority over planning and taxation in these industrial estates. “Any reliance on previous circulars stands displaced by this authoritative clarification,” the court said.
Article 265 – No Tax Without Law
Reinforcing a core constitutional principle, Justice Magadum invoked : “no tax shall be levied or collected except by authority of law.” The court emphasized that taxing power must flow from an express statutory provision or valid delegation. A mere recital in a lease-cum-sale agreement cannot substitute for statutory authorization. “Statutory power to levy taxes must necessarily flow from an express legislative provision or a valid statutory delegation,” the judgment quoted.
Alternate Remedy Objection Rejected
The Panchayat had raised a preliminary objection that the petitioners should first exhaust the appellate remedy under , which requires a 50% deposit. The court rejected this, holding that where the very assumption of jurisdiction is challenged as ultra vires, relegating parties to an appeal would be “futile and unjustified.” The appellate authority would be incompetent to adjudicate issues involving the precedence of the KIAD Act.
Key Observations
“Unless and until the industrial area is formally de-notified, no other local authority, including respondent - Gram Panchayat, can assume fiscal jurisdiction over the said area.”
“A tax cannot be imposed by inference or analogy or by presuming any intention. It must be imposed in accordance with the express language of the statute.”
“The power to tax is a legislative function and must be exercised strictly within the confines of the enabling statute. Any deviation from this principle renders the levy unconstitutional and ultra vires.”
Final Order
The court allowed all writ petitions and quashed the impugned demand notices. The decision sends a clear signal to local bodies across Karnataka: without explicit statutory backing and a formal withdrawal notification under , Gram Panchayats cannot levy property tax on industries in KIADB areas. For the dozens of companies in Sompura and similar industrial estates, this ruling provides immediate relief and affirms the primacy of the KIAD Act in industrial governance.
