Whether the petitioner, carrying on a quarry and crusher unit, be permitted to withdraw from the compounding applied for in the year 2016-17, for reason of failure to obtain licenses from the local authority, to carry on the quarry and crusher operations, is the question raised herein.

2. I have heard learned Senior Counsel Sri. K. Jayakumar, appearing for the petitioner and Sri. C.E. Unnikrishnan, learned Special Government Pleader (Taxes) for the respondent Panchayath.

3. The learned Senior Counsel would accept the position that the Hon'ble Supreme Court has consistently declared that a provision for compounding is a contract between the assessee and the Department; from which both cannot be allowed to withdraw. The learned Senior Counsel however would urge that the option for paying tax at the compounded rate having been exercised and the same being deemed to be a concluded contract, necessarily all the trappings of a contract would ensue and in such circumstance, the assessee; under Section 56 of the Indian Contract Act, 1872 (for brevity 'the Contract Act') could be absolved from the liability, flowing from the contract, on the ground of the obligation being impossible of performance.

4. The learned Senior Counsel would rely on Ganga Saran v. Firm Ram Charan Ram Gopal [A.I.R (39) 1952 SC (9)], Satyabrata Ghose v. Mugneeram Bangur & Co. and Another [A.I.R 1954 SC 44] and Naihati Jute Mills Ltd. v. Khyaliram Jagannath [A.I.R 1968 SC 522] to buttress the contention. It is argued that the impossibility of performance by itself extinguishes the obligation or duty and such impossibility would be akin to a discharge by the performance of the original promise, as has been found in M.D, Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. [(2004) 9 SCC 619]. Mary v. State of Kerala and Others [(2014) 14 SCC 272] is cited only to indicate a different path trod as far as a statutory contract is concerned, which however on facts would not be applicable, is the argument. Koothattukulam Liquors v. Deputy Commissioner of Sales Tax [(2015) 12 SCC 794] is relied on for the proposition that the Indian Contract Act would be applicable even in the case of a statutory contract.

5. The learned Special Government Pleader (Taxes) argues that there is no impossibility as urged by the petitioner, that did not exist, even at the time the petitioner applied for compounding. The compounding was applied for in the year 2016-17 and when the same was applied for before the specified date of 31.05.2016, the petitioner did not have a license either for the quarry or for the crusher unit. The petitioner had filed monthly returns for April & May, 2017 and on 27.05.2016, there was payment of the first installment of tax under the compounding scheme coming to Rs.5,62,000/-. As is well known, the compounding provision absolves the assessee from maintaining any books of accounts and restricts any inspection of the business premises of the assessee by the Department. The volume of sales cannot be examined, for reason of the assessee having opted for compounding. In the context of the assessee having filed returns and paid the first installment as per the compounding provision, the intention to continue with the compounding is further fortified. There could hence be no withdrawal from the option subsequently. The learned Special Government Pleader would also place reliance on Bhima Jewellery v. Assistant Commissioner (Assessment) [(2014) 71 VST 110 (SC)].

6. The facts as follows: The petitioner had been carrying on a quarry and crusher unit, for which D & O license was also obtained from the local authority as is indicated from Exts.P5 and P6, which were for the year 2013-14. Exhibits P1 to P4 are the various proceedings which culminated in the issuance of the D & O license. The assessee had also applied for compounding under the Kerala Value Added Tax Act, 2003 (for brevity 'the KVAT Act') for the said assessment year and paid taxes in accordance