Compounding liability follows subsisting permissions unless revised or cancelled under the VAT Rules

Where a dealer obtains multiple compounding permissions for different periods in the same year, the earlier permission continues unless it is revised or cancelled under the Rules. In the absence of proof that the secondary machines were removed or that the assessing authority was informed of any replacement, liability could be computed on the basis of the machinery covered by the existing compounding permissions. A later compounding application for different machinery operates independently and does not by itself displace an earlier subsisting permission. The stated principle is that assessment under compounding follows the permissions actually granted unless the statutory procedure for alteration is invoked.

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Issues: (i) Whether the Tribunal was justified in affirming the compounding liability computed on the basis of the secondary machines notwithstanding the assessee's claim that they were discarded on installation of a cone crusher; (ii) Whether the Tribunal erred in overlooking the earlier compounding proceedings already in force.

Issue (i): Whether the Tribunal was justified in affirming the compounding liability computed on the basis of the secondary machines notwithstanding the assessee's claim that they were discarded on installation of a cone crusher?

Analysis: The two compounding applications filed during the same year disclosed additions rather than replacements. The assessee had not sought revision of the earlier permission under Rule 11(7) of the Kerala Value Added Tax Rules, 2005, and there was no material to show that the secondary crushers had actually been removed or that the assessing authority had been intimated about any such removal. The factual foundation for disregarding the earlier composition basis was therefore absent.

Conclusion: The Tribunal was in sustaining the computation on the basis of the secondary machines; this issue was decided against the assessee.

Issue (ii): Whether the Tribunal erred in overlooking the earlier compounding proceedings already in force?

Analysis: The earlier compounding permission was not cancelled, and the later application for compounding for different machinery for the remaining period of the year operated independently. Section 25 of the Kerala Value Added Tax Act, 2003 was not invoked for regular reassessment; instead, the assessing authority proceeded on the footing of both compounding permissions. The earlier proceedings, therefore, did not defeat the liability determined for the relevant periods.

Conclusion: The Tribunal did not err in relying on the existing compounding proceedings; this issue was decided against the assessee.

Final Conclusion: The revision failed on facts and no substantial question of law arose, so the assessment based on the compounding permissions was upheld.

Ratio Decidendi: Where a dealer obtains multiple compounding permissions for different periods in the same year, an earlier permission remains effective unless revised or cancelled in accordance with the Rules, and liability may be computed on the basis of the permissions actually granted.

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