Compounded tax payment does not bar penalty where returns suppress turnover and natural justice is otherwise satisfied.

Under the Kerala Value Added Tax regime, payment at the compounded rate under Section 8 was treated as only an optional method of tax discharge and did not create immunity from penalty where a dealer filed untrue returns or suppressed turnover. The Court noted substantial suppression of contract receipts, non-compliance with disclosure requirements, and absence of a valid declaration for construction activity. It also found that notice, time, production of documents, and filing of objections satisfied natural justice. As no jurisdictional error or breach of hearing was shown, interference in writ jurisdiction under Article 226 was unwarranted and the penalty order was upheld.

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Issues: Whether the penalty order under the Kerala Value Added Tax Act, 2003 was liable to be interfered with in writ jurisdiction on the grounds of absence of jurisdiction, violation of natural justice, and absence of wilful suppression of turnover.

Analysis: The dispute arose from a works contractor who had opted to pay tax at the compounded rate, but the record showed substantial suppression of contract receipts in the quarterly returns and non-compliance with the statutory disclosure obligations under the KVAT regime. Payment at the compounded rate under Section 8 was only an optional method of discharge of tax under Section 6 and did not confer an absolute immunity from penalty where the dealer filed incorrect returns or failed to make the required disclosures. The statutory scheme of self-assessment required a correct return, and the failure to file the prescribed declaration for contractors undertaking construction activity reinforced the finding that the petitioner had not obtained or acted upon any valid compounding permission for the suppressed turnover. The material also showed that notice was issued, time was granted, documents were produced, and objections were filed, so the plea of denial of hearing was not accepted. In writ jurisdiction, interference was unwarranted because the impugned order was not shown to be without jurisdiction or contrary to natural justice.

Conclusion: The penalty order was upheld and no interference was called for in exercise of jurisdiction under Article 226 of the Constitution of India.

Ratio Decidendi: Where a dealer under the KVAT self-assessment regime files untrue returns and suppresses taxable turnover, the availability of compounding does not bar penalty proceedings, and writ interference is not justified absent jurisdictional error or breach of natural justice.

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