Compounding election binds the assessee; later administrative clarification cannot override the statutory tax scheme.

A compounding election under the Kerala General Sales Tax Act binds the assessee once the application is accepted and tax is paid on that basis, so the assessee cannot later withdraw and seek regular assessment on actual turnover. The scheme under section 7(1)(a) is an independent option for eligible hotels and is not defeated merely because the assessee lacked three years' prior business. A later administrative clarification cannot override the statute or disturb a completed compounding arrangement for the relevant year, because instructions operate only consistently with law.

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Issues: (i) Whether an assessee who applied for compounding, paid tax under the compounding scheme, and filed returns on that basis could later withdraw from the scheme and seek regular assessment on actual turnover; (ii) whether a later clarification issued by the Commissioner could override the statutory compounding provisions for the relevant assessment year.

Issue (i): Whether an assessee who applied for compounding, paid tax under the compounding scheme, and filed returns on that basis could later withdraw from the scheme and seek regular assessment on actual turnover.

Analysis: The statutory scheme under section 7(1)(a) of the Kerala General Sales Tax Act, 1963 confers an option on certain bar attached hotels to pay turnover tax at a compounded rate instead of on actual sales turnover under section 5(2). The scheme operates on the assessee's election, and once the application is made, accepted, and acted upon by payment of tax, the assessment proceeds in terms of that election. Section 7(1)(a) is not made dependent on section 7(1)(b), and the absence of three years' prior business does not disable a first-year assessee from opting for compounding under clause (a). The assessee had already availed the scheme and could not thereafter revert to regular assessment after disabling the Department from verifying the actual turnover.

Conclusion: The assessee had no right to withdraw from the compounding scheme or demand regular assessment on actual turnover.

Issue (ii): Whether a later clarification issued by the Commissioner could override the statutory compounding provisions for the relevant assessment year.

Analysis: Administrative instructions may benefit assessees only when they are consistent with law, but they cannot prevail over the statute. The clarification relied on was issued several years after the relevant assessment year and was contrary to the plain language of section 7. It could not govern the completed compounding arrangement for the assessment year in question, and the assessing authority was not bound to apply it in derogation of the Act.

Conclusion: The Commissioner's later clarification could not override the statutory provisions or disturb the assessment made under the compounding scheme.

Final Conclusion: The statutory election to pay tax at compounded rates was binding on both sides, and the appeal failed on merits.

Ratio Decidendi: Where a taxing statute confers an option to elect a compounding scheme, acceptance and implementation of that election bind the assessee and the Department, and a subsequent administrative clarification contrary to the statute cannot displace the statutory regime.

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