Compounded tax for ornament dealers must be based on admitted return or accounts, not assessed tax.

Under the Kerala Value Added Tax Act compounding provision for ornament dealers, the "highest tax payable" for the relevant preceding three years must be computed on the basis of tax admitted in the return or accounts, not on assessed tax or best judgment assessment. The assessing authority's role is confined to comparing the return with the accounts and adopting the higher figure where the accounts show greater turnover or tax liability. Because the statute does not permit substitution of an assessed demand as the benchmark, the department cannot import a basis not provided by the provision. The Tribunal's view was upheld.

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Issues: Whether, for levy of compounded tax under section 8(f)(i) of the Kerala Value Added Tax Act, 2003, the "highest tax payable" for the relevant preceding three years has to be taken on the basis of the tax admitted in the return or accounts, or on the basis of the tax assessed and demanded by the department.

Analysis: The provision permits an ornament dealer opting for compounding to pay tax at 200 per cent of the highest tax payable by him as conceded in the return or accounts for a period of twelve months during any of the three preceding years. The language of the section does not authorise adoption of assessed tax or best judgment tax as the base for compounding. The assessing authority's limited task is to compare the return and the accounts and adopt the higher of the two where the accounts disclose a higher turnover or tax liability than the return. If the return itself shows equal or higher tax payable, that amount governs. The department could not import a basis of assessment that the statute does not provide.

Conclusion: The compounded tax had to be fixed with reference to the highest tax admitted in the return or accounts, not the assessed tax. The order of the Tribunal was upheld.

Ratio Decidendi: Where a compounding provision expressly bases tax on the highest tax payable as conceded in the return or accounts, the assessing authority cannot substitute assessed tax as the benchmark unless the statute so provides.

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