Compounding under sales tax law does not require contract production at the permission stage; later disclosure rules apply after approval.

A works contractor seeking compounding under the Kerala General Sales Tax Act was not required to produce the contracts with awarders at the permission stage. The scheme of section 7 separates the application for permission from the later return-filing obligation: section 7(8) allows the option to be exercised by application, section 7(9) permits grant or rejection for recorded reasons, and section 7(11) requires disclosure of contracts and awarders' certificates only after permission is granted. Rule 30 governs the application procedure and does not impose production of contracts as a precondition. Rejection of the compounding application on that ground was therefore unsustainable.

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Issues: Whether a works contractor seeking payment of tax at the compounded rate under section 7(7)/(7A) of the Kerala General Sales Tax Act, 1963 is required to produce the contracts entered into with the awarders as a condition for grant of permission, and whether section 7(11) applies at the stage of considering such permission.

Analysis: The scheme of section 7 distinguishes between the grant of permission to pay tax at the compounded rate and the subsequent filing of returns after permission is granted. Section 7(8) permits the option to be exercised by application, section 7(9) empowers the assessing authority to grant or reject permission for recorded reasons, and section 7(11) requires filing of returns showing the contracts undertaken along with awarders' certificates only after the contractor opts for compounding and after permission is granted. Rule 30 of the Kerala General Sales Tax Rules, 1963 governs the application procedure and does not require production of the contracts as a precondition for permission. The insistence on production of contracts at the permission stage was therefore inconsistent with the statutory scheme.

Conclusion: The contractor was not bound to produce the contracts as a condition for grant of permission to pay tax at the compounded rate, and rejection of the compounding application on that ground was unsustainable.

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