Compounding permission continues unless a dealer consciously and formally withdraws the option; filing A-2 returns alone is insufficient.

Under section 7(2-A) of the Tamil Nadu General Sales Tax Act, 1959, permission to pay tax by compounding continues unless the dealer consciously and formally withdraws the option. Filing A-2 returns under Rule 18, even if mistaken, does not amount to an implied withdrawal where the turnover limit is not exceeded and no express waiver is shown. The statutory scheme requires a positive act of withdrawal, and the provision was treated as beneficial to small dealers, warranting a liberal construction. On that basis, compounding permission remains in force unless withdrawal is clearly and deliberately made.

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Issues: Whether the filing of A-2 returns under Rule 18 of the Tamil Nadu General Sales Tax Rules amounted to a withdrawal of the assessee's option so as to terminate the permission already granted under section 7 of the Tamil Nadu General Sales Tax Act, 1959, for payment of tax by compounding.

Analysis: Section 7(2) requires a formal application for permission to pay tax under the compounding scheme, and section 7(2-A) provides that the permission continues so long as the dealer remains eligible and has not withdrawn the option. The turnover limit was not exceeded and there was no express withdrawal of the option. The mere filing of returns in A-2 form, whether by mistake or otherwise, was held not to amount to a conscious or formal withdrawal. The statutory scheme contemplates a positive act of waiver, and withdrawal cannot be presumed by implication. The provision, being intended to benefit small dealers, was also treated as one calling for a liberal approach rather than a strict one.

Conclusion: Filing A-2 returns did not withdraw the assessee's option under section 7, and the permission to compound continued in force.

Ratio Decidendi: Under section 7(2-A) of the Tamil Nadu General Sales Tax Act, 1959, continuance of compounding permission ends only on a conscious and formal withdrawal of the option by the dealer, and not by mere implied inference from the form of returns filed.

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