Compounding under VAT cannot trigger separate assessment of M-sand when additional unenumerated machines are used in the process.

Dealers who had opted for compounding under the Kerala VAT Act were not liable to separate assessment of M-sand produced in the same manufacturing process merely because VSI/HSI machines were also used. The compounding scheme taxed only the specified crushing machines relevant for computing compounded tax, and the exemption from separate assessment extended to M-sand produced during that process. A later amendment prescribing specific rates for VSI/HSI machines was held substantive and prospective, confirming that those machines were not covered for the earlier period. The demand notices and assessment orders were quashed, and the dealers were held entitled to compounding without separate assessment of the M-sand.

---

---

Issues: Whether dealers who had opted for compounding under Section 8(b) of the Kerala Value Added Tax Act were liable to separate assessment of M-sand produced using VSI/HSI machines that were not reckoned for compounding.

Analysis: The compounding scheme under Section 8(b) treated tax as payable on the basis of specified crushing machines used in the production of granite metal. The statutory design showed that only identified machines were relevant for computing compounded tax, while the exemption from separate assessment attached to the M-sand produced in the course of that manufacturing process. The fact that the dealers used additional VSI/HSI machines for shaping or further processing did not alter the character of the M-sand as a product obtained during the same production process. The later amendment introducing specific rates for VSI/HSI machines was substantive and prospective, and it reinforced the conclusion that such machines were not intended to be included for the earlier period.

Conclusion: The demand for separate assessment of M-sand produced through VSI/HSI machines was not sustainable, and the impugned notices and orders were liable to be quashed.

Final Conclusion: The writ petitions succeeded, the challenged demand proceedings were set aside, and the dealers were held entitled to the benefit of compounding without separate assessment of the M-sand in question.

Ratio Decidendi: Under a compounding provision that taxes only specified machinery, a product generated in the course of the same manufacturing process cannot be separately assessed merely because it is produced with the aid of additional unenumerated machines; a later substantive amendment operates prospectively unless expressly made retrospective.

---