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of <h1>Compounded tax cancellation quashed; turnover of compounding year held irrelevant to liability assessment for 2012-2013</h1> HC held that the cancellation of the petitioner's permission to pay tax on compounded basis was unsustainable. The authority had relied on an alleged ... Cancellation of permission that was granted to the petitioner for payment of tax on compounded basis - HELD THAT:- Although the petitioner did not refer to the notice issued by the respondents proposing the cancellation of the permission to compound, and did not appear before the respondents for the adjudication that followed, it is noted from Ext.P2 order that, the proposal for cancellation of the permission that was granted to the petitioner through Ext.P1 order is based on an alleged discrepancy noticed in respect of the turnover of the petitioner for the assessment year 2012-2013, the year in which he opted for payment of tax on compounded basis. It is relevant to note that, since the petitioner's payment of tax on compounded basis for the assessment year 2012-2013, is based on the turnover reported for the previous three consecutive years, any suppression, even if established against the petitioner for the year 2012-2013, will not have any bearing on the tax paid by the petitioner on compounded basis for the said year since, the turnover of the petitioner for the year 2012-2013 is not relevant for the purposes of determining his tax liability on compounded basis for that year. Thus, the very basis for proceeding against the petitioner, for cancellation of the permission to paid tax on compounded basis, was flawed, and for the said reason, Ext.P2 order passed against the petitioner, cancelling Ext.P1 permission granted to him to pay tax on compounded basis, also cannot be legally sustained. Ext.P2 order quashed - petition allowed. A jewellery dealer registered under the Kerala Value Added Tax Act opted for payment of tax on a compounded basis under Section 8(f) for the assessment year 2012-13. The compounding was permitted by Ext.P1 order, based on the highest tax payable in any of the three consecutive years preceding 2012-13, as per return/accounts or tax paid, whichever was higher. Subsequently, the department issued Ext.P2 cancelling the compounding permission, citing a discrepancy in the dealer's turnover for 2012-13. The Court noted that, under Section 8(f), the turnover of the compounding year (2012-13) is irrelevant for determining the tax liability on a compounded basis for that very year, which is instead calculated with reference to the previous three years. Consequently, 'any suppression, even if established against the petitioner for the year 2012-2013, will not have any bearing' on the compounded tax for that year. As the foundation for cancellation was legally flawed, Ext.P2 was quashed, and the writ petition allowed with consequential reliefs.
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