Compounding fee collection requires a recorded order by the prescribed authority; pre-assessment tax payment was left for adjustment in assessment.

Composition of an offence under the Andhra Pradesh General Sales Tax Act is valid only when the prescribed authority records a compounding proceeding or order on an offer to compound; because no such order or admission of offence existed and the amount was merely collected by a subordinate officer, the compounding fee was held illegal and refundable. A pre-assessment tax payment made during inspection was not ordered to be refunded in writ jurisdiction where assessment proceedings were already pending and the payment could be adjusted against the eventual liability; the Court directed adjustment of the amount against the final assessment with refund of any excess thereafter.

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Issues: (i) Whether the collection of Rs. 40,000 towards compounding fee was valid under section 32 of the Andhra Pradesh General Sales Tax Act, 1957; (ii) Whether the collection of Rs. 80,000 towards tax, made before assessment, warranted refund under article 226 of the Constitution of India.

Issue (i): Whether the collection of Rs. 40,000 towards compounding fee was valid under section 32 of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: Section 32 contemplates composition of an offence only by the prescribed authority and only on the basis of an offer or willingness to compound, followed by an order passed or proceeding recorded by that authority. The record disclosed no admission of offence, no composition proceedings, and no order by the prescribed authority. The amount was merely collected and receipted by a subordinate officer on the date of inspection.

Conclusion: The collection of Rs. 40,000 towards compounding fee was illegal and was directed to be refunded to the assessee.

Issue (ii): Whether the collection of Rs. 80,000 towards tax, made before assessment, warranted refund under article 226 of the Constitution of India.

Analysis: The Court found that the amount had been paid in the context of an inspection that disclosed irregularities, while the allegation of coercion was disputed and no prompt protest had been made. Since assessment proceedings were already initiated and finalisation of assessment was pending, the Court declined to order immediate refund in writ jurisdiction merely because no assessment order or demand had then been made. Instead, the amount was to be adjusted against the ultimate tax or penalty liability, with refund of any balance after assessment.

Conclusion: Immediate refund of the Rs. 80,000 was declined, but the amount was directed to be adjusted against the assessment and any excess refunded thereafter.

Final Conclusion: The writ petition succeeded only in part: the compounding fee was ordered to be returned, while the tax amount was left to be dealt with in the pending assessment and adjusted accordingly.

Ratio Decidendi: Composition of an offence under the sales tax law is valid only when exercised by the prescribed authority through a recorded order or proceeding on an offer to compound; a pre-assessment tax collection will not be ordered refunded in writ jurisdiction where assessment is already in progress and the amount can be adjusted against the final liability.

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