Statutory procedure for cancelling compounding permission requires hearing first and prior approval only after due consideration.

Under the Kerala Value Added Tax Act, cancellation of compounding permission must follow the statutory sequence: the assessing authority must first consider the materials, give the dealer an opportunity of being heard, and then seek prior approval of the Deputy Commissioner before passing any final order. Obtaining approval before hearing the dealer or before the assessing authority applies its mind is inconsistent with the statutory scheme. The defect is procedural, so the impugned notice is to be treated as a mere notice simplicitor, the earlier approval is set aside, and the matter must be reconsidered afresh in accordance with law with an opportunity for objection.

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Issues: Whether the notice proposing cancellation of compounding permission under Section 8(f)(iv) of the Kerala Value Added Tax Act, 2003 was vitiated because prior approval of the Deputy Commissioner was obtained before hearing the dealer and before the assessing authority took a final decision.

Analysis: The provision vests the power to refuse permission or cancel the permission to pay tax under compounding with the assessing authority for valid and sufficient reasons. The proviso requires that no order be issued without giving the dealer an opportunity of being heard and without prior approval of the Deputy Commissioner. Since approval had been obtained before the hearing and before the matter was properly considered by the assessing authority, the procedure adopted did not conform to the statutory scheme. The defect was treated as procedural, and the impugned notice was directed to be treated only as a notice simplicitor, with the earlier approval set aside.

Conclusion: The challenge to the procedure succeeded, and the matter was remitted to be processed afresh in accordance with law, with the assessee given an opportunity to object before the assessing authority.

Final Conclusion: The writ petition was allowed on the ground that the statutory procedure for cancellation of compounding permission had not been followed, while leaving the merits of cancellation open for fresh consideration.

Ratio Decidendi: Where a statute requires both hearing of the dealer and prior approval before cancellation of compounding permission, the approval must be considered only after the assessing authority has applied its mind on the materials and the prescribed sequence cannot be reversed.

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