Statutory ceiling on compounding fee cannot be ed; unlawful excess levy is not saved by acquiescence or estoppel.

A statutory ceiling on compounding fees under the Karnataka Sales Tax Act could not be exceeded for an offence treated under section 29(2)(d). Because section 31(b) fixed the maximum at Rs. 1,000, a demand of Rs. 2,000 was unlawful and excessive. Payment made to avoid prosecution did not create acquiescence or estoppel where the levy itself was beyond statutory power, so the dealer remained entitled to challenge the collection. The quashing of the excess compounding fee was sustained.

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Issues: (i) Whether, for an offence treated as falling under section 29(2)(d) of the Karnataka Sales Tax Act, 1957, the prescribed authority could lawfully collect a compounding fee of Rs. 2,000 when section 31(b) fixed the maximum at Rs. 1,000. (ii) Whether the dealer was precluded by acquiescence or estoppel from challenging the levy after agreeing to compounding.

Issue (i): Whether, for an offence treated as falling under section 29(2)(d) of the Karnataka Sales Tax Act, 1957, the prescribed authority could lawfully collect a compounding fee of Rs. 2,000 when section 31(b) fixed the maximum at Rs. 1,000.

Analysis: Section 31 distinguished between offences under section 29(1)(d) or section 29(2)(c), for which compounding could extend beyond Rs. 1,000 in specified circumstances, and all other offences, for which the ceiling was Rs. 1,000. The notice issued to the dealer was specifically under section 29(2)(d), which did not fall within the exception in section 31(a). The case therefore attracted section 31(b), and the statutory maximum remained Rs. 1,000.

Conclusion: The compounding fee of Rs. 2,000 was not authorised by law and the levy was excessive.

Issue (ii): Whether the dealer was precluded by acquiescence or estoppel from challenging the levy after agreeing to compounding.

Analysis: Acceptance of compounding does not bar a challenge where the authority has demanded and collected an amount beyond the statutory maximum. The estoppel argument can operate only when the amount demanded is within the lawful limit. Where the levy itself is unlawful, voluntary payment made to avoid prosecution does not prevent the assessee from questioning the legality of the demand.

Conclusion: The dealer was not estopped from challenging the illegal collection.

Final Conclusion: The appeal failed, and the order quashing the excess compounding fee was sustained.

Ratio Decidendi: Where a statute prescribes a fixed ceiling for compounding of an offence, any demand beyond that ceiling is unlawful and cannot be validated by acquiescence or estoppel arising from payment made to avoid prosecution.

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