Compounded tax for jewellers under section 8(f) turns on business history and Explanation I applies to both limbs.

For compounding tax under section 8(f) of the Kerala Value Added Tax Act, Explanation I applies to both sub-sections (i) and (ii). A dealer who has carried on business for two full years out of the three preceding financial years, and for any period in the remaining year, falls under section 8(f)(i); the highest tax for those years is then worked out by grossing up the turnover and tax for the partial year. Section 8(f)(ii) applies only when the dealer is not eligible under sub-section (i), such as where the requisite prior-year business period is absent. On that basis, the assessed jeweller was treated under section 8(f)(i).

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Issues: Whether, for the assessment year 2006-07, the petitioner's liability to pay compounded tax as a jeweller fell under section 8(f)(i) of the Kerala Value Added Tax Act, 2003 or under section 8(f)(ii), and whether Explanation I to section 8(f) applied only to sub-section (ii) or to both sub-sections (i) and (ii).

Analysis: The petitioner had commenced business in February 2004, had carried on business only for 51 days during 2003-04, and had carried on business for the full periods in 2004-05 and 2005-06. On the scheme of section 8(f), Explanation I was held to apply to both sub-sections (i) and (ii). Sub-section (i) governs a dealer who has carried on business for two full years out of the three preceding financial years and for any period in the remaining year, in which event the highest tax payable for any of those years is determined by grossing up the turnover and tax for the partial year. Sub-section (ii) applies only where the dealer is not eligible under sub-section (i), such as a dealer who had not carried on business for the requisite earlier years and had conducted business only for part of the previous year.

Conclusion: The petitioner was covered by section 8(f)(i) read with Explanation I, and the assessing officer correctly grossed up the turnover and tax for 2003-04 and computed compounded tax accordingly. The petition challenging the assessment was rejected.

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