Statutory compounding election cannot be withdrawn for a mistaken rate entry; interest relief may still apply on delayed assessment.

An assessee who elected statutory compounding under the Kerala Value Added Tax Act could not later abandon that election and seek turnover-based assessment merely because the compounding application mentioned a lower percentage than the amended statutory rate. The application had to be treated as one made under the statute at the applicable compounded rate, and the assessee's mistake in stating the rate did not displace the statutory scheme. Interest on the enhanced tax demand was nevertheless disallowed for the period identified, because no timely order had been passed on the compounding request, monthly returns had been accepted without verification, and the earlier appellate order had remained operative for some time.

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Issues: (i) whether an assessee who opted for payment of tax at compounded rate could later revert to turnover-based assessment because the application mentioned a lower percentage than the amended statutory rate; (ii) whether interest could be recovered on the enhanced tax demand in the circumstances of the case.

Issue (i): whether an assessee who opted for payment of tax at compounded rate could later revert to turnover-based assessment because the application mentioned a lower percentage than the amended statutory rate.

Analysis: The compounding option was held to be available only in accordance with the statute, and not on terms chosen by the assessee. The application had to be treated as one made under section 8(f) of the Kerala Value Added Tax Act for payment at the statutory compounded rate applicable to the relevant year. The mistake in mentioning 150 per cent instead of the correct 200 per cent under the amended provision was treated as an error by the assessee, not as a basis to reject statutory compounding or to seek turnover-based assessment after having paid tax under the compounding scheme.

Conclusion: The assessment at the statutory compounded rate was upheld and the assessee was not entitled to revert to regular assessment.

Issue (ii): whether interest could be recovered on the enhanced tax demand in the circumstances of the case.

Analysis: Although the assessment was restored, the Court noticed that no timely order had been passed on the compounding application, monthly returns had been accepted without verification, and the earlier appellate order had remained in force for some time. On that basis, recovery of interest for the relevant period was found unjustified if the arrears were paid within the stipulated time.

Conclusion: Recovery of interest was disallowed for the period indicated by the Court.

Final Conclusion: The revision succeeded, the assessment was restored under the compounding provision, and the assessee obtained relief against interest recovery for the period covered by the direction.

Ratio Decidendi: An assessee who has opted for statutory compounding cannot disown that election and seek regular assessment merely because the compounding application misstated the rate, where the statute prescribes the applicable compounded rate.

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