Compounded sales tax base must use the higher preceding-year amount under the Kerala sales tax scheme.

For assessment year 2002-03, a gold jewellery dealer opting for compounded taxation under section 7(1)(a) of the Kerala General Sales Tax Act had to compute liability at 200 per cent of the higher amount between the tax actually paid at the compounded rate for the preceding year and the tax payable under sections 5(1) and 5A on the basis of the return and accounts. Because the amended provision effective from 1 April 2002 required comparison with the regular tax payable for the preceding year, the higher base applied where the compounded tax paid was lower. On that construction, the compounded liability was to be calculated on the tax payable under sections 5(1) and 5A.

---

---

Issues: Whether, for the assessment year 2002-03, a dealer in gold jewellery opting for compounded taxation under section 7(1)(a) of the Kerala General Sales Tax Act, 1963 was liable to pay 200 per cent of the higher amount between the tax actually paid at compounded rate for the preceding year and the tax payable under sections 5(1) and 5A as per the return and accounts for that year.

Analysis: The amended provision with effect from 1 April 2002 required comparison of the tax paid at compounded rate for the preceding year with the tax payable under sections 5(1) and 5A for that year, and mandated payment of 200 per cent of whichever amount was higher. The respondent had paid tax at compounded rate for 2001-02, but that amount was less than the tax payable on the basis of the return and accounts under sections 5(1) and 5A. The provision therefore operated on the higher amount, namely the tax payable under sections 5(1) and 5A, rather than on the lesser compounded tax actually paid.

Conclusion: The respondent was liable to pay compounded tax for 2002-03 at 200 per cent of the higher tax payable under sections 5(1) and 5A for 2001-02, and the Revenue's revision succeeded.

Final Conclusion: The orders of the Tribunal and the first appellate authority were set aside and the assessing officer's order was restored for the year in question as well as the subsequent year on the same principle.

Ratio Decidendi: Where the statute requires compounding tax to be computed on the higher of the tax actually paid in the preceding year and the tax payable under the regular charging provisions for that year, the higher amount alone forms the base for the prescribed compounded liability.

---