A) ABSTRACT / HEADNOTE

State of Kerala & Ors. v. Moushmi Ann Jacob, [2025] 2 S.C.R. 1273 (2025 INSC 255) examines the scope and proper construction of a Government Notification dated 25.02.2021 issued under the Kerala Conservation of Paddy Land and Wetland Act, 2008, which exempts landowners holding up to 25 cents from paying conversion (reclamation) fees and prescribes graded fee rates for larger holdings. The respondent owned 14.57 acres and applied for change of land category; the Revenue Officer demanded 10% of fair value calculated on the entire holding. The High Court (Single Judge and Division Bench) interpreted the Notification to permit exemption of the initial 25 cents and directed fee calculation only on the excess; the State challenged that view before the Supreme Court.

The Court held that delegated notifications granting concessions must be strictly construed and that the plain language of Clauses (1) and (3) of the Notification forms two distinct classes:

(i) holdings up to 25 cents (entitled to fee-free category change), and

(ii) holdings exceeding 25 cents (liable to 10% on the entire holding, with higher slab for >1 acre). The High Court’s approach of deducting 25 cents before computation was held erroneous.

The State’s classification was held permissible under Article 14 so long as there is a rational nexus to the object; the Court found such nexus. The appeals were allowed and the respondent directed to pay conversion fee calculated on the total extent of land. 

Keywords: conversion fee, delegated legislation, exemption clause, literal interpretation, reasonable classification, Kerala Paddy Act, 25 cents exemption.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The dispute arises from executive action by the State of Kerala to amend conversion fees for lands not notified under Section 27(A) of the Kerala Conservation of Paddy Land and Wetland Act, 2008. In G.O. dated 25.02.2021 the Government introduced a scheme exempting holdings up to 25 cents (as on 30.12.2017) from conversion fees, and prescribed graded charges 10% of fair value for holdings above 25 cents up to 1 acre, and 20% for holdings above 1 acre. A clarification dated 23.07.2021 further addressed aggregation rules and affidavit requirements.

The background reflects administrative policy aimed at facilitating small residential constructions while discouraging large-scale conversion of paddy/wetland. The respondent sought category change for a 14.57 acre parcel after removal from the data bank; the Revenue Officer computed 10% on the full property value and demanded payment. The High Court accepted a narrower construction that the first 25 cents are exempt and only the excess attracts the fee and directed recalculation accordingly. The State challenged the High Court’s interpretive step before the Supreme Court, advancing that the Notification intended two non-overlapping classes and that once a holding exceeds 25 cents the entire holding falls within the higher fee slab.

The Supreme Court framed the issue as one of construction of delegated legislation (a Notification) and the permissible scope of administrative classification under Article 14, while emphasizing accepted principles for interpreting exemptionary and fiscal provisions.

D) FACTS OF THE CASE

The respondent owned land described in Survey No. 97/2, Karikode Village, Thodupuzha Taluk, totalling 14.57 acres (i.e., well above 25 cents). On 26.10.2019 she filed application under Form 6 of Section 27 (and later Form 5) seeking change of category to enable use as security for an education loan. The Revenue Officer, relying on valuation proximate to a neighboring plot and the prescripts of the Act and Rules, issued notice on 27.01.2021 demanding Rs. 1,74,840/- (being 10% of fair value Rs.17,48,400/-) as conversion fee. The State had issued GO (Rt) No.1166/2021/Rev on 25.02.2021 exempting lands up to 25 cents and prescribing the 10% slab for holdings exceeding 25 cents.

The respondent challenged the demand under Article 226, asserting (inter alia) that the exemption of 25 cents applied and the fee should be computed only on the excess area. The Single Judge ruled in favour of the respondent, treating the fee-free 25 cents as deductible from the holding before computing the levy. The Division Bench affirmed, and a review failed. The State thus appealed to the Supreme Court.

Key factual points:

(i) date of application pre-dates the Notification but de-notification of land occurred in January 2021;

(ii) the holding is significantly larger than the 25-cent threshold;

(iii) the administration adopted neighboring property rates to fix fair value;

(iv) Government issued subsequent clarification on aggregation and cut-off date.

E) LEGAL ISSUES RAISED

1. Whether the Notification dated 25.02.2021 exempts only holdings not exceeding 25 cents or permits owners with larger holdings to claim exemption for the initial 25 cents and pay fee only on the excess?

2. Whether a Notification (delegated legislation) granting fee exemptions must be interpreted strictly and by literal construction when exemption is claimed?

3. Whether the State’s classification between holdings (≤25 cents; >25 cents–≤1 acre; >1 acre) violates Article 14 or is a permissible reasonable classification?

4. Whether the relevant date for valuation/fee computation is the date of application or the date of de-notification/processing?

F) PETITIONER / APPELLANT’S ARGUMENTS

The State (appellant) argued that: the Notification creates two distinct classes and the exemption applies only where the entire holding does not exceed 25 cents as on 30.12.2017; if the holding exceeds 25 cents the entire holding is liable to the slabbed fee (10% or 20% as applicable); the High Court erred in deducting 25 cents and computing fee on the balance; Note-2 in the Schedule and the Clarification of 23.07.2021 reinforce the legislative intent to treat a single unit as whole and deny piecemeal exemptions; classification is reasonable and bears nexus to public policy objectives.

G) RESPONDENT’S ARGUMENTS

The respondent contended that: her application dated 26.10.2019 is the operative date and should attract the pre-notification regime; the Notification’s graded language indicates incremental computation (i.e., exempt first 25 cents then charge on excess); equitable purpose of encouraging small residential constructions would be defeated if fee imposed on full holding; case law supports computation on the subject plot’s fixed valuation rather than proximate plot; precedent and public interest favoured the High Court’s reading.

H) JUDGMENT 

The Court allowed the appeals and overruled the High Court’s construction. The core of the reasoning: a Notification is delegated legislation and must yield to the parent statute where inconsistent; however, an exemptionary Notification requires strict construction  a claimant must show entitlement. The Court applied the literal rule and related precedents (including C.C.E. v. Hari Chand Shri Gopal and Commissioner of Customs v. Dilip Kumar & Co.) to conclude that the plain language of Clauses (1) and (3) manifests an intent to create two separate and mutually exclusive categories:

(i) holdings up to 25 cents entitled to fee-free category change, and

(ii) holdings more than 25 cents subject to 10% of fair value on the holding. Clause 4 establishes a distinct higher slab for holdings exceeding one acre.

The Court rejected the High Court’s approach as an impermissible fusion of classes which reads a partial exemption into the Notification. The Clarification dated 23.07.2021 and Rule 12(9) of the Rules further support the classification and the administration’s requirement that aggregated holdings exceeding 25 cents cannot avail the exemption.

On Article 14 the Court held the State’s classification reasonable, having rational nexus to the object (protecting smaller cultivators/small-home constructors while controlling larger conversions), and therefore constitutionally valid. On valuation and maintainability, the Court confined itself to interpreting the Notification and directed that the respondent must pay conversion fee calculated on the entire extent of land in ownership. Appeals allowed.

a. RATIO DECIDENDI

The operative rule: where a Notification grants an exemption, a literal and strict construction is warranted; the plain language of the 25-cents exemption creates a categorical distinction and denies partial/deductible exemption for holdings exceeding that threshold. Consequently, once ownership exceeds 25 cents, the entire holding falls within the higher fee slab and conversion fee must be calculated on the total extent. The State’s classification meets the Article 14 test of reasonable nexus to objective.

b. OBITER DICTA 

The Court observed by way of guidance that:

(i) delegated legislation does not enjoy plenary immunity and must align with statutory scheme;

(ii) in tax/fee-like contexts literal/plain meaning carries particular force though absurdity can warrant contextual reading;

(iii) administrative clarifications and rules (e.g., Rule 12(9)) are relevant to construing government notifications; and

(iv) affidavits and aggregation rules serve to prevent artificial fragmentation of holdings to claim exemption.

These observations, while not strictly necessary to the result, underscore interpretive principles for similar notifications.

c. GUIDELINES

1. Exemptionary Notifications should be construed strictly; claimants must satisfy conditions expressly stipulated.

2. When a Notification prescribes slabs by holding size, classes must be treated as discrete; benefits for a lower slab do not automatically apply incrementally when the holding exceeds that slab unless language clearly permits.

3. Administrative clarifications that fix cut-off dates and aggregation rules are authoritative aids to construction and prevent fragmentation of land to avail exemptions.

4. Reasonable classification by the State in land-conservation and revenue policy will survive Article 14 scrutiny if a rational nexus to the object exists.

I) CONCLUSION & COMMENTS

The decision reaffirms orthodox principles of statutory and subordinate-legislation interpretation in the context of fiscal/exemptionary measures: plain meaning and strict construction prevail, and administrative classifications will be upheld if rationally connected to the legislative object. Practically, the judgment curtails attempts to claim partial exemptions by fragmenting larger holdings and clarifies that slab-based notifications operate on ownership as a whole unless the text expressly provides otherwise.

For practitioners, the case highlights two tactical points:

(i) challenge to a fee demand must scrutinize the exact Notification language and applicable cut-off dates and aggregation rules;

(ii) when advising landholders, counsel should verify ownership as of the stipulated cut-off date and prepare affidavits/records required by administrative guidelines.

The judgment balances protective policy for small landholders with the State’s regulatory imperative to check large-scale conversions of paddy/wetlands, and provides a clear interpretive rule for future disputes on similar executive notifications.

J) REFERENCES

a. Important Cases Referred

1. Registrar of Cooperative Societies, Trivandrum v. K. Kunjabmu, (1980) 1 SCC 340.

2. C.C.E. v. Hari Chand Shri Gopal, (2011) 1 SCC 236.

3. Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co., (2018) 9 SCC 1.

4. Balram Kumawat v. Union of India & Ors., (2003) 7 SCC 628.

5. Natural Resources Allocation, In Re: Special Reference No.1 of 2012, (2012) 10 SCC 1.

6. Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India, (1985) 1 SCC 641.

7. Swami Vivekanand College of Education & Ors. v. Union of India & Ors., (2012) 1 SCC 642.

8. Charanjit Lal Chowdhury v. Union of India, (1950) SCC 833.
   (References as cited in the Judgment.)

b. Important Statutes Referred

1. Constitution of India, Article 14.

2. Kerala Conservation of Paddy Land and Wetland Act, 2008.

3. Kerala Conservation of Paddy Land and Wetland Rules, 2008 (including Rule 12(9)).

4. Government Order (Rt) No.1166/2021/Rev dated 25.02.2021 (Notification).

5. Clarification dated 23.07.2021 (Government).