Compounding permission for a continuing works contract must govern later assessment, with prior turnover deductions preserved.

A granted compounding permission for a continuing civil works contract under the Kerala General Sales Tax framework could not be displaced by a later revisiting of assessment for the same contract. The compounding scheme under Section 7(7) and Rule 30A applied contract-wise, so the benefit allowed in the first year could not be denied for the next year merely because regular assessment was later proposed. The earlier direction for regular assessment for 2001-2002 was left undisturbed, but turnover already assessed under the compounding scheme for the earlier years had to be deducted. The reassessment was therefore confined to the limited scope of the existing compounding arrangement.

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Issues: (i) Whether the assessee was entitled to be assessed under the compounding scheme for the years 1999-2000 and 2000-2001. (ii) Whether the regular assessment for the year 2001-2002 required interference.

Issue (i): Whether the assessee was entitled to be assessed under the compounding scheme for the years 1999-2000 and 2000-2001.

Analysis: The contract was a civil works contract covered by the compounding provision. For the first year, the assessing authority had already allowed the compounding application, and the suo motu revision under Section 35 of the Kerala General Sales Tax Act interfered only with the assessment, not with the permission to compound. Under Rule 30A of the Kerala General Sales Tax Rules, 1963, the procedure for works contractors is contract-specific, and the benefit of compounding granted for the same continuing contract in the first year could not be denied for the next year merely because the regular assessment was sought to be made thereafter. The court distinguished cases where no application was filed or no permission had been granted.

Conclusion: The assessee was entitled to assessment under Section 7(7) of the Kerala General Sales Tax Act for the years 1999-2000 and 2000-2001, subject to determination of any shortfall in turnover under the compounding scheme.

Issue (ii): Whether the regular assessment for the year 2001-2002 required interference.

Analysis: The earlier judgment had already directed regular assessment for 2001-2002, and no appeal was maintained against that part of the order. The court therefore declined to disturb that direction, while clarifying that turnover already assessed under the compounding scheme for the earlier years had to be given due deduction.

Conclusion: The regular assessment for 2001-2002 was left undisturbed, subject to deduction of turnover already assessed for the earlier years.

Final Conclusion: The State's appeal was allowed only to the limited extent of clarifying the scope of the suo motu order and the manner of reassessment, while the assessee's entitlement to compounding for the first two years was upheld and the assessment for the third year was maintained with appropriate deductions.

Ratio Decidendi: Where a compounding permission has been granted for a continuing contract under the statutory works-contract compounding scheme, a subsequent assessment for the same contract cannot be converted into a regular assessment merely because the assessing authority later revisits the assessment; the assessment must proceed consistently with the existing compounding permission.

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