Compounding tax and SSI concession cannot be claimed together; penal interest revision must be considered on merits.

An assessee who opts for compounding under section 7(7A) of the Kerala General Sales Tax Act, 1963 cannot also claim the reduced SSI rate under S.R.O. No. 1728 of 1993, because that concession applies only where the taxable turnover of manufactured goods can be identified and bifurcated after regular assessment; the compounding scheme taxes the works contract turnover as a whole, so the concession was denied and the demand sustained. An order refusing revision against a demand of penal interest was also unsustainable because such a demand is revisable on merits; the refusal was set aside and the revision was restored for fresh consideration after notice and hearing.

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Issues: (i) Whether an assessee paying tax at the compounded rate under section 7(7A) of the Kerala General Sales Tax Act, 1963 could claim the reduced rate under S.R.O. No. 1728 of 1993 for goods manufactured by an SSI unit. (ii) Whether the order declining revision against demand of penal interest was liable to be interfered with and remitted for consideration on merits.

Issue (i): Whether an assessee paying tax at the compounded rate under section 7(7A) of the Kerala General Sales Tax Act, 1963 could claim the reduced rate under S.R.O. No. 1728 of 1993 for goods manufactured by an SSI unit.

Analysis: The concessional rate under S.R.O. No. 1728 of 1993 applies to the taxable turnover of goods manufactured by an SSI unit, which requires identification and bifurcation of the relevant turnover after regular assessment. In a compounding regime under section 7(7A), the tax is paid on the works contract turnover as a whole at the prescribed compounded rate, without dissection of turnover into separate components. Since the assessee had opted for and obtained the benefit of compounding, the assessee could not simultaneously claim the separate concession meant for taxable turnover of manufactured goods. The choice of compounding was inconsistent with the scheme required for claiming the SSI concession.

Conclusion: The claim for the concessional rate under S.R.O. No. 1728 of 1993 was rejected and the tax demand based on compounding was sustained.

Issue (ii): Whether the order declining revision against demand of penal interest was liable to be interfered with and remitted for consideration on merits.

Analysis: The order refusing to entertain the revision was based on the view that such a demand was not revisable. The judgment notes that the earlier view on non-maintainability had been reversed, and that an order demanding penal interest is revisable by the Deputy Commissioner. The refusal to entertain the revision therefore could not stand, and the revisions required fresh consideration after notice and hearing on the merits of the liability to penal interest.

Conclusion: The order refusing revision was set aside and the revision petitions were restored for decision on merits.

Final Conclusion: The assessment based on compounding was upheld, but the challenge relating to penal interest succeeded to the extent of securing a remand for fresh revisionary consideration.

Ratio Decidendi: A dealer who opts for compounding under section 7(7A) cannot claim a separate SSI concessional rate intended for ascertainable taxable turnover of manufactured goods, and a demand for penal interest is revisable where the law permits revision on merits.

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