Composition tax election is binding for the relevant year despite later enhancement of the compounded rate.

An assessee who validly opted for composition of tax under section 7 of the Kerala General Sales Tax Act, 1963, and whose option was accepted, was bound by that election for the relevant year. The later enhancement of the compounded rate by the Finance Act, 2002 did not permit withdrawal from the compounded scheme or assessment on actual turnover. The assessment had therefore to be sustained at the revised compounded rate applicable for the year, because a taxpayer cannot resile from an accepted composition option merely due to an adverse rate change.

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Issues: Whether an assessee who had opted for composition of tax under section 7 of the Kerala General Sales Tax Act, 1963 and whose option had been accepted, could later withdraw from the compounded scheme and be assessed on actual turnover after the compounded rate was enhanced by the Finance Act, 2002.

Analysis: The assessees had filed compounding applications at the beginning of the relevant year and the department had accepted the option. After the Finance Act, 2002 increased the compounded rate, the assessees attempted to withdraw from the scheme and pay tax on actual turnover. The Tribunal had cancelled the assessment under the compounded rate, but the earlier view of the Court was that once composition is validly opted and accepted, the assessee cannot resile from it merely because the rate becomes less favourable. The assessment had therefore to be completed at the revised compounded rate applicable for the year.

Conclusion: The withdrawal from the compounded scheme was not permissible, and the assessment had rightly to be sustained on the compounded rate.

Ratio Decidendi: An assessee who has opted for and been accepted under a composition scheme is bound by that election for the relevant period and cannot withdraw from it after an adverse change in the applicable compounded rate.

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