Compounding under Kerala VAT is final once accepted, with challenge limited to a patent error in fee quantification.

Under the Kerala Value Added Tax Act, compounding of an offence under section 74 carries finality once the assessee voluntarily seeks composition and pays the amount determined, so the assessee cannot later reopen the compounding order by disputing the underlying admission of suppression or irregularity. A limited challenge may still lie under the appellate remedy in section 55 where the dispute is confined to a patent or purely arithmetical mistake in quantification of the compounding fee; however, where the challenge goes beyond quantification and attacks the basis of composition itself, interference is not warranted.

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Issues: (i) Whether an assessee who opts for compounding of an offence under the Kerala Value Added Tax Act can challenge the compounding order and the consequential assessment by contending that the fee was wrongly quantified. (ii) Whether the present case involved only a patent mistake in quantification of the compounding fee so as to warrant interference.

Issue (i): Whether an assessee who opts for compounding of an offence under the Kerala Value Added Tax Act can challenge the compounding order and the consequential assessment by contending that the fee was wrongly quantified.

Analysis: Section 74 permits the assessing authority to accept compounding from a person who has committed or is reasonably suspected of having committed an offence, and on payment of the amount determined, no further penal or prosecution proceedings lie. Section 55 provides a right of appeal to a person aggrieved, and prior decisions had recognised that a challenge may lie where the dispute is confined to a patent mistake in quantification. At the same time, where the assessee has admitted the offence and sought composition, the process of compounding signifies acceptance of the underlying irregularity and turnover suppression, and the assessee cannot resile from that admission merely to reopen the compounding decision.

Conclusion: A challenge is not maintainable merely because the assessee later disputes the compounding order after opting for composition and admitting the offence; only a narrow challenge confined to patent error in quantification can arise.

Issue (ii): Whether the present case involved only a patent mistake in quantification of the compounding fee so as to warrant interference.

Analysis: The material showed that the compounding was sought after inspection disclosed turnover suppression and irregular accounting, and the petitioner accepted composition in lieu of prosecution. The dispute raised was not confined to a purely arithmetical or patent error in the fee; it went to the basis on which the suppression and liability were worked out. In such circumstances, the case did not fall within the limited exception recognised for interference with quantification of compounding fee.

Conclusion: The case did not involve a patent mistake in quantification warranting interference.

Final Conclusion: The appeal failed, and the judgment of the Single Judge dismissing the writ petition was sustained.

Ratio Decidendi: An assessee who voluntarily opts for compounding and admits the offence cannot challenge the composition order except in the narrow case of a patent mistake confined solely to quantification of the compounding fee.

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