Compounded tax option requires timely departmental acceptance; regular tax payer remains entitled to concessional rate.

An assessee is not treated as having opted for compounded tax merely because a compounding application was filed and later accepted belatedly, where the department gave no express acceptance within the relevant assessment year and the assessee in fact paid tax under the regular charging provision. On those facts, there was no consensus for compounding under Section 7 of the Kerala General Sales Tax Act, and the assessee remained entitled to the concessional rate applicable to regular tax payment under Section 5. A delayed departmental acceptance could not be used after the assessment year to deny that concession or impose differential liability.

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Issues: (i) Whether the assessee could be treated as having opted for payment of tax on compounded basis under Section 7 of the Kerala General Sales Tax Act merely because an application had been filed and later belatedly accepted; (ii) Whether the assessee was entitled to the benefit of the concessional rate applicable to regular tax payment under Section 5 of the Kerala General Sales Tax Act.

Issue (i): Whether the assessee could be treated as having opted for payment of tax on compounded basis under Section 7 of the Kerala General Sales Tax Act merely because an application had been filed and later belatedly accepted.

Analysis: The application for compounding was not acted upon within the relevant assessment year, and there was no express acceptance by the department during that period. The assessee also did not conduct itself as one paying tax on compounded basis, since the tax was in fact paid under the regular provision, even though the return form used was one associated with compounding. On these facts, there was no consensus between the assessee and the department on payment under Section 7, and the factual setting was distinguishable from the earlier precedent relied on by the Single Judge.

Conclusion: The assessee cannot be treated as having opted for, or been bound to, payment on compounded basis under Section 7.

Issue (ii): Whether the assessee was entitled to the benefit of the concessional rate applicable to regular tax payment under Section 5 of the Kerala General Sales Tax Act.

Analysis: Once it was found that the assessee had actually paid tax under Section 5 and not under Section 7, the concessional rate notified for bar attached hotels in the relevant period became applicable. The department could not, after the expiry of the assessment year, accept an unacted-upon compounding application and on that basis deny the concession and fasten differential liability.

Conclusion: The assessee was entitled to the concessional rate applicable to tax paid under Section 5.

Final Conclusion: The impugned assessment orders and the judgment upholding them were unsustainable, and relief followed in favour of the assessee with reassessment directed in accordance with the regular charging provision.

Ratio Decidendi: Where an assessee applies for compounding but the department does not accept the option within the relevant assessment period and the assessee actually pays tax under the regular provision, the assessee is not bound to compounding and remains entitled to the benefits attached to regular tax payment.

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