Compounding benefit under Tamil Nadu VAT survives beyond the threshold; only excess turnover is taxed separately.

For assessment year 2011-12, Section 3(4)(b) of the Tamil Nadu Value Added Tax framework was read as allowing a dealer to continue with the compounded rate up to the Rs. 50 lakh threshold, while taxing only the excess turnover under Section 3(2). Mere crossing of that limit did not justify denying the compounding benefit altogether or taxing the entire turnover under Section 3(2). An assessment notice based on that wider approach was treated as inconsistent with the statutory scheme and was quashed, with the matter remitted for reconsideration and reassessment after hearing the dealer.

---

---

Issues: Whether, for the assessment year 2011-2012, a dealer assessed under Section 3(4) of the Tamil Nadu Value Added Tax Act, 2006 could be denied the compounding benefit and taxed on the entire turnover under Section 3(2) merely because the turnover exceeded Rs. 50 lakhs.

Analysis: Section 3(4)(b) of the Tamil Nadu Value Added Tax (Fourth Amendment) Act, 2011 was construed as permitting a dealer to pay tax at the compounded rate up to Rs. 50 lakhs and, for turnover above that limit, to pay tax under Section 3(2). On that construction, crossing the threshold did not justify excluding the dealer altogether from the benefit of Section 3(4) or levying tax under Section 3(2) on the entire turnover. The impugned notice, which proceeded on that wider basis, was held to be inconsistent with the statutory scheme.

Conclusion: The impugned proceedings could not stand to the extent they sought to levy tax on the entire turnover under Section 3(2); they were set aside and the assessment was directed to be reconsidered and reassessed after giving the petitioner an opportunity of hearing.

Final Conclusion: The writ petition succeeded, the assessment notice was quashed, and the matter was sent back for fresh consideration in accordance with the statutory framework.

Ratio Decidendi: Exceeding the turnover threshold under Section 3(4) does not extinguish the statutory compounding benefit altogether, but only subjects the excess turnover to tax under Section 3(2).

---