Compounded tax permission cancellation upheld for tax default, with regular assessment sustained after undisclosed purchases and non-remittance were found.

Permission to pay tax at compounded rates under the Kerala Value Added Tax Act was cancelled after inspection disclosed undisclosed purchases and non-remittance of purchase tax. The cancellation was sustained under rule 11(6) of the Kerala Value Added Tax Rules because default in payment of tax under section 6(2) justified withdrawal of compounded-tax benefits, even though the assessee later remitted the compounding fee and revised the return. The consequent regular or best judgment assessment was also treated as maintainable, following earlier authority on cancellation of compounded tax permission for tax default.

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Issues: Whether cancellation of permission to pay tax at compounded rates under the Kerala Value Added Tax Act, 2003 was valid on the basis of default in payment of tax under section 6(2) read with rule 11(6) of the Kerala Value Added Tax Rules, 2005, and whether the consequent best judgment assessment could stand.

Analysis: The assessee had been permitted to pay tax at compounded rates under section 8(c)(i) of the Kerala Value Added Tax Act, 2003. The permission was cancelled after inspection revealed undisclosed purchases and non-remittance of purchase tax, though the assessee later remitted the compounding fee under section 74 and revised the return. The cancellation was upheld on the basis of rule 11(6) of the Kerala Value Added Tax Rules, 2005. The issue was treated as covered by an earlier decision upholding cancellation of compounded tax permission for failure to pay tax under section 6(2) and recognising the resulting regular assessment.

Conclusion: Cancellation of the compounded tax permission under rule 11(6) was upheld, and the revision failed.

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