The court emphasized proper application of the Kerala Value Added Tax Act provisions regarding compounding assessments, mandating reevaluation where statutory guidelines were overlooked.

ORDER

Harisankar V. Menon, J An assessee under the provisions of the Kerala Value Added Tax Act, 2003 (for short, the ‘Act’) is the revision petitioner herein. The assessee is stated to be a jeweller. It started business during January, 2013. For the year 2012-13, the assessee paid tax under the regular stream. For the year 2013-14 also, the tax was satisfied under the regular scheme, since in the previous year (2012-13), the assessee did not have business for the whole year. However, for the year 2014-15, the petitioner-assessee opted to pay tax at the compounded rates as prescribed under Section 8 (f) of the Act by filing an appropriate application. The afore application was the preferred offering to satisfy tax at 150% of the tax paid for the previous year 2013-14. But, the assessing authority fixed the compounded liability for the period 2014-15, also reckoning the purchase tax payable under Section 6 (2) of the Act for the period 2012-13. In appeal, the appellate authority accepted the contention of the petitioner that the purchase tax under (2) of the Act does not require to be reckoned for the calculation of compounded tax, going by Circular No.38/2008 issued by the Commissioner of Commercial Taxes. But later, the assessment was again completed, according to the appellant, not in tune with the directions issued pursuant to Annexure A8 order. The said order is again challenged before the appellate authority, and by Annexure A9 order, the matter was remitted to the assessing authority since Annexure A8 order was one issued without observing the principles of natural justice. Pursuant thereto, Annexure A10 order is issued by notionally fixing the liability for the year 2012-13 and taking it as the base for fixing the compounded liability for 2014-15. Since the first appeal against the order was unsuccessful, the petitioner- assessee filed TA(VAT) No.277 of 2020 before the Kerala Value Added Tax Appellate Tribunal, Additional Bench, Kozhikode. By Annexure A13 order dated 03.11.2025, the Tribunal having upheld the assessment as above, the petitioner has filed the captioned revision petition.

2. We have heard Smt.Latha K., the learned counsel for the petitioner-assessee, as well as Dr.Thushara James, the learned Senior Government Pleader for the respondent-revenue.

3. The Tribunal has upheld the assessment, essentially placing reliance on the Explanation 1 to Section 8 (f) of the Act, which reads as under:-

“Where a dealer has not transacted any business for the last three years consecutively, the highest tax paid or payable for the year during the year or years he transacted business shall be considered for the above purpose and where during any such preceding year, the dealer had not transacted business for any period in that financial year, the tax payable for the twelve business shall be calculated proportionately on the basis of tax payable or the total turnover conceded, as applicable, for the period during which such dealer had transacted business had fixed the compounding tax liability for the above years accordingly.”

(Underlining supplied)

4. At the same time, we notice that Explanation 4 to Section

8(f) of the Act reads as under:-

“Where a dealer is opting for payment of tax under this clause for the first time and had only business in the previous year and the tax payable as per return or accounts during such previous year is less than the output tax payable, then the tax payable for the year under option shall be notionally re-determined on the basis of output tax, for determining the tax liability for the year under option.

(Underlining supplied)

Thus, the statute has been amended to provide that, in cases where the applicant/jeweller has not transacted business for t