Compounding scheme excess payment was refundable with interest once the turnover slab application was accepted.

Acceptance of an assessee's application under the compounding scheme for the turnover slab up to Rs. 200 crores limited the tax liability to the compounding amount prescribed for that slab. Any sum deposited beyond the amount legally payable under the scheme was not compounding money but excess tax. Such excess was refundable under section 29 of the Act, with interest under section 29(2). The authority therefore could not retain the entire deposit once the lower slab was accepted and had to refund the excess amount to the assessee with interest.

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Issues: Whether, after acceptance of the assessee's application under the compounding scheme for the turnover slab up to Rs. 200 crores, the assessing authority could retain the entire sum deposited in excess of the compounding amount payable and refuse refund of the excess.

Analysis: Section 7D provided for payment of compounding money in lieu of tax, and section 2(n) treated composition money as tax. The application under the Government Order dated December 5, 2007 was accepted for the slab up to Rs. 200 crores, for which the compounding amount payable was Rs. 70 lakhs. Once that slab was accepted, the authority could retain only the amount legally due under the scheme. Any amount deposited over and above the prescribed compounding money was not payable under the scheme and constituted excess tax. Such excess was refundable under section 29 of the Act, with interest under section 29(2).

Conclusion: The excess amount of Rs. 30 lakhs could not be treated as compounding money and was liable to be refunded to the assessee with interest.

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