Compounding scheme cannot be withdrawn after acceptance, but penalty requires proof of evasion rather than mere non-payment.

Once permission to compound had been granted and tax was paid under that arrangement, the assessee could not resile from the compounding scheme as a matter of right. However, penalty proceedings could not stand on a footing of evasion where the matter required consideration as a case of non-payment or default in payment. The penalty orders were therefore set aside for fresh consideration after giving the assessee an opportunity to be heard, while the challenge to withdrawal from compounding failed.

---

---

Issues: (i) whether the petitioner could withdraw from the compounding scheme after permission had been granted and tax had been remitted under the scheme; (ii) whether penalty proceedings were sustainable where the default was one of non-payment and not evasion.

Issue (i): whether the petitioner could withdraw from the compounding scheme after permission had been granted and tax had been remitted under the scheme.

Analysis: The compounding application had already been allowed by the department, and thereafter the petitioner had filed returns and paid tax under the compounding arrangement. The attempt to withdraw was made only after the scheme had been acted upon. On the facts, the earlier decision relied on by the petitioner was distinguished because there the permission had not culminated in a concluded arrangement when withdrawal was sought.

Conclusion: The petitioner was not entitled to resile from the compounding scheme.

Issue (ii): whether penalty proceedings were sustainable where the default was one of non-payment and not evasion.

Analysis: The petitioner had subsequently paid tax and sought consideration of the withdrawal request, but the authority proceeded on the footing of intentional evasion. The Court held that the matter required examination as a case of non-payment or default in payment, not evasion, and that this aspect had not been properly considered by the assessing authority.

Conclusion: The penalty orders were unsustainable and were set aside, with a fresh opportunity directed to be afforded to the petitioner.

Final Conclusion: The challenge to withdrawal from compounding failed, but the penalty proceedings could not be sustained on the ground of evasion and were remitted for fresh consideration.

Ratio Decidendi: Once an assessee has been granted permission to compound and has acted under that scheme, withdrawal cannot be claimed as of right, and penalty can be imposed only where the revenue establishes evasion rather than a mere default in payment.

---