Escaped turnover reassessment can follow a compounding basis, and rectification is not the only remedy.

Where compounding under the Kerala Value Added Tax Act was approved on the basis of the assessee's declared turnover, and that turnover was later found to be /incorrect, the factual foundation of compounding was treated as vitiated. The court stated that the entire turnover could then be assessed as escaped turnover, and the earlier compounding arrangement did not bar reassessment. It further held that rectification is confined to apparent mistakes on the record and does not extend to a wrong factual declaration by the assessee, so the revenue was not restricted to rectification alone. The reassessment route was therefore upheld.

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Issues: (i) Whether an assessment under the Kerala Value Added Tax Act could be initiated under the escaped turnover provisions despite the assessee having been accepted under the compounding scheme. (ii) Whether rectification under the statute was the only permissible course when a mistake was noticed in the compounding proceedings.

Issue (i): Whether an assessment under the Kerala Value Added Tax Act could be initiated under the escaped turnover provisions despite the assessee having been accepted under the compounding scheme.

Analysis: The compounding approval was founded on the turnover declared by the assessee. Once the assessing authority found that the highest turnover conceded for the purpose of compounding was wrong, the foundation of the compounding itself stood vitiated. In that situation, the entire turnover could be treated as escaped turnover and brought to tax under the assessment provision invoked by the revenue. The earlier compounding arrangement did not bar such action.

Conclusion: The initiation of proceedings under the escaped turnover provision was held to be valid, in favour of the Revenue.

Issue (ii): Whether rectification under the statute was the only permissible course when a mistake was noticed in the compounding proceedings.

Analysis: Rectification is confined to apparent errors on the face of the record and is directed to errors attributable to the assessing officer, not to a wrong declaration made by the assessee. The mistake in this case was not a mere clerical or patent error in the assessment record, but a wrong factual basis for granting compounding. Therefore, the revenue was not limited to rectification alone and could proceed under the assessment machinery.

Conclusion: Rectification was not the exclusive remedy, and the revenue's resort to reassessment was upheld.

Final Conclusion: The Tribunal's view was set aside on the core question of jurisdiction, the revenue's challenge succeeded, and the matters were sent back for consideration of the remaining issues raised by the assessee.

Ratio Decidendi: Where the factual foundation of compounding is found to be erroneous because the assessee's declared turnover was wrong, the assessment authority may treat the turnover as escaped turnover and invoke the statutory reassessment power, and such action is not confined to rectification of apparent mistakes.

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