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2015 (1) TMI 453 - HC - VAT and Sales TaxReopening of assessment on assessments being completed on compounded basis - Whether assessments completed in respect of an assessee on compounded basis can be re-opened subsequently, pursuant to a revision of the assessment for an earlier year, the tax paid in which year was taken as the basis for determination of the amount payable by the assessee in the compounding proceedings Held that:- Any change in the assessment orders for the previous years could not have affected the tax paid on compounding basis for the year 2006-07 because the reference to the earlier years was only to determine the turnover tax payable as conceded in the return or accounts or the turnover tax actually paid - This data would have been available by the end of the following AY for the purposes of finalising the amount of tax liable to be paid by the assessee for that year on compounding basis - the legislature appears to have deliberately omitted a reference to the assessed tax of the previous years in the formula prescribed for compounding, probably on realising that an assessed tax could be modified in subsequent proceedings by way of appeal or revision, thus depriving the figure of a certainty and finality that is warranted for compounding purposes. Similar matter has been decided in State of Kerala Versus Malabar Ornaments (P.) Ltd. [2011 (1) TMI 1281 - KERALA HIGH COURT] the option of payment of tax at compounded rates is an alternative to the regular method of payment of tax after an elaborate procedure of assessment - Section 7 begins with a non-obstante clause that clearly indicates that the scheme of payment of tax envisaged thereunder is an alternative to the regular method of assessment and payment of tax - thus, when an assessee opts to pay tax at compounded rates and such an option exercised by the assessee is accepted by the department, then it will not be open to the department, at a later point in time, to re-open those proceedings save to the limited extent of rectifying any apparent computational mistakes that have been occasioned during the compounding proceedings - the option of composition of tax is like a bilateral agreement between the parties with an object to dispense with the rigours of regular assessment - the dealer is given a choice to opt for compounded payment of tax and once the option is exercised and the same is accepted by the authority concerned, it is no longer open to the dealer to request for a regular assessment as envisaged u/s 5 and 5A of the KGST Act thus, the re-opening of concluded compounding proceedings, based on the revised assessments for the AY 2005-06, cannot be legally sustained thus, the order is set aside. Re-opening of the concluded proceedings was sought on a different ground that while computing the figure representing 140% of the purchase turnover for the year 2006-07, the petitioner had not included the opening stock of that year in the purchase turnover for the year - even if it is accepted that the department had the power to rectify mistakes that were noticed in the computation of tax in the compounding proceedings, the power is one that has to be exercised strictly in accordance with the statutory provision - Section 43 of the KGST Act revealed that the power has to be exercised by the authority passing the original order, within three years from the date of the original order - order permitting the petitioner to pay tax on compounding basis for the year 2006-07 is dated 28.11.2006 and order passed in rectification is dated 29.07.2010, well beyond the three year period prescribed in the statute - as the statutory period of limitation limits the jurisdiction and powers of the authority to exercise his power of rectification, the notice and order cannot sustained Decided in favour of petitioner.
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