Exemption under composition scheme prevented inclusion of old gold ornament purchases in compounded tax liability.

A composition dealer in gold and silver was entitled, under the exemption notification, to exclude the purchase turnover of old gold ornaments from compounded tax liability. Refixing the compounded tax by adding that excluded turnover conflicted with the express exemption in the notification, so the reassessment basis was legally unsustainable. The refixation was therefore invalid and was set aside in favour of the assessee.

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Issues: Whether the refixation of compounded tax by including the purchase turnover of old gold ornaments was valid in view of the exemption notification.

Analysis: The dealer had opted for composition under the applicable notification, which exempted dealers in gold and silver from tax on the purchase of old ornaments. The refixation proceeded on the basis of including the purchase turnover of all gold ornaments, even though the notification expressly excluded such turnover from the composition liability. The rectification therefore conflicted with the exemption granted under the notification.

Conclusion: The refixation of compounded tax by including the purchase turnover of old gold ornaments was invalid and was set aside in favour of the assessee.

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