Petitioner cannot challenge tax assessment after voluntarily compounding evasion offense under section 82 and making payments

Karnataka HC dismissed the petition challenging tax levy jurisdiction. The petitioner had voluntarily compounded tax evasion offenses under section 82, agreeing to pay penalty, CF amount, Entry Tax, and VAT without protest or claiming duress. The court held that by compounding the offense, the entire case was closed and nothing survived for adjudication. The petitioner could not subsequently challenge assessment orders after voluntarily subjecting himself to the compounding process and making payments without raising any defense of coercion.

---

---

Issues Involved:
The judgment involves issues related to quashing of an order for collection of value added tax, penalty, and other orders, jurisdiction of the respondent to levy tax, compounding of tax evasion, and violation of principles of natural justice.

Quashing of Impugned Order:
The petitioner, a partnership firm engaged in manufacturing Gutkha and Pan Masala, sought to quash an order passed by the respondent for collection of value added tax. The respondent issued a notice under section 79 of the Karnataka Value Added Tax Act, 2003, to the petitioner directing payment or submission of a consent letter for compounding of the offense. The petitioner contended that the assessment of tax, inspection proceedings, and compounding were under duress and coercion, and the levy of compounding fee was arbitrary and unconstitutional.

Tax Evasion Allegations:
The respondent alleged that the petitioner had evaded tax liability under the Karnataka Entry Tax Act, 1979, by paying Entry Tax at a lower rate for purchases of scheduled goods. The respondent issued a notice under section 79 of the KVAT Act, providing the petitioner an opportunity to compound the offense or face prosecution. The petitioner admitted tax liabilities and agreed to pay the evaded tax liability, compounding the offense by paying the required amounts.

Jurisdiction and Authorization of Respondent:
The petitioner argued lack of jurisdiction for the respondent to initiate proceedings, contending that no assessment order was made and no fair hearing was provided. The respondent, however, asserted that proper procedures were followed, and the petitioner voluntarily admitted tax liabilities and compounded the offense. The respondent was authorized by the Commissioner to conduct inspections and initiate proceedings, as per the provisions of the Value Added Tax Act.

Violation of Principles of Natural Justice:
The petitioner claimed that the entire process was vitiated, arbitrary, and unconstitutional, and that he had not agreed to compounding of tax evasion. The respondent argued that the petitioner had voluntarily admitted tax liabilities, agreed to compound the offense, and made payments accordingly. The respondent contended that the petitioner had alternative remedies available under the Act and had not shown any violation of fundamental rights or principles of natural justice.

Conclusion:
After careful consideration, the Court dismissed the writ petition, finding that the petitioner had voluntarily admitted tax liabilities, compounded the offense, and made payments without protesting or claiming duress. The Court held that the petitioner's contentions of coercion and lack of jurisdiction were not substantiated, and the petition was not meritorious for consideration under Article 226 of the Constitution of India.

---