2011 (1) TMI 1285 - HC - VAT and Sales Tax

Summary

Issues:
1. Justification of Tribunal in canceling assessment under compounded rate.
2. Interpretation of provisions under Kerala General Sales Tax Act, 1963 regarding compounding scheme.
3. Permissibility of withdrawal from compounding scheme once opted by assessee.

Analysis:
1. The primary issue in this case was whether the Tribunal was justified in canceling the assessment under the compounded rate opted by the assessee under section 7 of the Kerala General Sales Tax Act, 1963. The assessees had initially applied for compounding at a rate of 120% of the tax payable for the previous year. However, the compounded rate was later increased to 200% by the Finance Act, 2002. The assessees continued to pay the lower amount until October 2002 when they applied to withdraw from the compounding scheme and pay tax on the actual turnover. The assessing officer initially accepted this withdrawal but later rejected it based on a court decision stating that once compounding is opted and accepted, withdrawal is not permissible. The High Court, following a previous decision, allowed the revisions and restored the order of the first appellate authority confirming the assessment under section 19 at the compounded rate.

2. The assessments involved in this case were for the year 2002-03, where the assessees had applied for compounding at a certain rate which was later revised by the Finance Act, 2002. The assessees continued to pay the lower rate until they applied to withdraw from the compounding scheme. The assessing officer initially accepted this withdrawal but later rejected it based on the court decision that withdrawal from compounding is not permissible once opted and accepted. The High Court, following a previous decision, upheld the assessment under section 19 at the revised compounded rate, emphasizing the importance of adhering to the provisions of the Kerala General Sales Tax Act, 1963.

3. The question of whether an assessee can withdraw from the compounding scheme once opted was a crucial aspect of this case. The assessing officer initially allowed the assessees to withdraw from the compounded rate and pay tax on the actual turnover. However, this decision was later reversed based on a court decision stating that withdrawal from compounding is not permissible once opted and accepted. The High Court, in line with the previous decision, emphasized the binding nature of opting for compounding and upheld the assessment under section 19 at the revised compounded rate, highlighting the importance of consistency and adherence to legal provisions in tax assessments.