1999 (3) TMI 607 - HC - VAT and Sales Tax

Summary

Issues:
1. Imposition of penalty under section 45A of the Kerala General Sales Tax Act for an offence compounded under section 47 of the Act.

Analysis:
1. The main issue in this case revolves around whether a penalty can be imposed on a person under section 45A of the Kerala General Sales Tax Act for an offence that has been compounded under section 47 of the Act. The petitioner, a registered dealer, had certain irregularities detected in their business place, for which they applied for compounding under section 47. The compounding fee was paid and accepted, settling the offence. The question arises whether penalty proceedings can be initiated for the same offence after compounding.

2. The term "compounding" refers to settling a debt or dispute by concession or special arrangement. Once an offence is compounded, no further action can be taken against the assessee for that specific offence. The essence of compounding involves a bilateral agreement to condone the offence upon payment of the specified amount. In this case, penalty was imposed under section 45A for the same offence that was previously compounded under section 47, which is penal in nature.

3. The contention raised is that compounding under section 47 is only related to criminal offences and prosecution, not penalty imposition. However, the wording of section 47 clearly states that once an offence is compounded, no penal action, including penalty or prosecution proceedings, can be initiated for the same offence. Both compounding under section 47 and penalty under section 45A fall under the same Chapter VIII of the Act, dealing with "Offences and penalties."

4. Referring to a previous decision, it was established that once an offence is compounded, neither the assessee nor the department can challenge the compounding order. The wording of section 47 unambiguously indicates that upon payment of the compounding fee, the offence is considered settled, barring any further penalty or prosecution actions for that specific offence.

5. A comparison with a decision from the Madras High Court highlights the distinction between compounding and penalty imposition for different violations of the Act. In the present case, penalty proceedings cannot be initiated for the same offence compounded under section 47. The protection provided under section 47 of the Kerala Act condones the offence itself upon compounding, unlike the provision in the Madras General Sales Tax Act.

6. Another decision discussed the nature of compounding proceedings as a compromise between parties, emphasizing that once an offer for compounding is accepted, the dispute is considered compromised, binding both parties to the agreement. This observation reinforces the idea that compounding settles the matter and precludes revision applications regarding the compounding fee.

7. Upon a thorough analysis, the court concluded that compounding under section 47 serves as a shield against both prosecution and penalty proceedings for the same offence. The interpretation of the penal provision and established principles lead to the decision that once an offence is compounded, no penalty or prosecution can be pursued for that specific offence. Consequently, the penalty order and revisional orders were set aside, and the original petition was allowed.