Compounding fee linked to tax evasion requires completed assessment first; excess collection must be refunded if liability is lower.

Compounding fee collected under section 47 cannot be finally sustained without completing assessment and determining the actual tax liability. Where the dealer is registered and assessment remains pending, the assessing officer must issue notice under section 17(3), determine turnover and tax, and then verify the tax sought to be evaded against the amount already collected at inspection. If the evasion figure is below the maximum fee collected, the excess is refundable; if it equals or exceeds that ceiling, no adjustment is required. The character of the transactions as works contract transactions was left for the assessing officer to decide on the basis of the materials and admissions.

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Issues: Whether the compounding fee collected under section 47 could be sustained without completing the assessment and determining the tax liability, and whether any excess fee required refund after such assessment.

Analysis: Section 47 contemplated collection of the tax sought to be evaded together with an equal amount as compounding fee, subject to the prescribed maximum. As the petitioner was a registered dealer and assessment had not been completed, the assessing officer was required to issue notice under section 17(3), determine the turnover and tax, and then verify the extent of tax evasion with reference to the tax paid up to the date of inspection. If the tax sought to be evaded was below the maximum compounding fee already collected, the excess was liable to be refunded; if it was equal to or above the maximum, no modification was necessary. The question whether the transactions were works contract transactions was left to be considered by the assessing officer on the basis of the materials and admissions.

Conclusion: The demand was not finally upheld in the abstract; the matter was sent for assessment and verification, with a direction to refund any excess compounding fee if the evaded tax was found to be less than the amount collected.

Ratio Decidendi: Where compounding fee is linked to tax sought to be evaded, the assessing authority must first complete assessment and determine the actual tax liability before the legality of the fee collection can be finally settled.

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