Compounded tax computation must include prior-year purchase tax liability, limiting exemption claims under the scheme.

Under the compounded tax scheme, prior-year purchase tax liability under section 5A had to be included in computing tax under section 7(1)(a) after the Explanation inserted by the Finance Act, 1997. The court distinguished earlier authority dealing with a separate exemption notification and relied on prior precedent favouring the Revenue. It declined to decide the broader position before the Explanation, but held that exemption could not be claimed to exclude the section 5A liability for the later assessment years. The assessment was to be re-fixed accordingly, with relief confined to 1998-99.

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Issues: Whether, in computing tax under the compounded rate under section 7(1)(a), the liability under section 5A for the preceding years had to be reckoned, and whether the assessee was entitled to exemption from such purchase tax liability for the assessment years in question.

Analysis: The Explanation inserted to section 7(1)(a) by the Finance Act, 1997 with effect from 1 April 1997 fixed the liability under the compounded scheme by including tax payable for the preceding years under section 5A as well. The earlier decision relied on by the Tribunal was distinguished as it dealt with a separate exemption notification and not with the compounding provision itself. The issue was also covered by a prior decision in favour of the Revenue, and the Tribunal's view allowing exemption for the later assessment years could not be sustained. The Court declined to pronounce on the broader contention relating to the position before insertion of the Explanation.

Conclusion: The assessee was not entitled to exemption from purchase tax liability for the later assessment years, and the assessment had to be re-fixed by including the section 5A liability for the preceding years.

Final Conclusion: The revision was partly allowed, with relief confined to the assessment year 1998-99 and the Tribunal's order set aside for the later years.

Ratio Decidendi: Where the compounding provision expressly requires inclusion of prior-year purchase tax liability, exemption cannot be claimed to exclude that liability from computation under the compounded scheme.

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