Annual turnover governs KVAT compounding, and closed branches cannot be used to reduce the composition base.

Under the Kerala Value Added Tax compounding scheme, annual turnover remains the governing basis for composition tax, and it cannot be proportionately reduced by excluding the turnover of a branch that was later closed. The scheme does not permit bifurcation of the dealer's establishment to recast the prior year's turnover, because the earlier turnover formed part of the business during the relevant period. Rule 11(2) on applications not in order was also considered in context, but once the application was entertained and compounding was implemented, rejection on that procedural ground was not available. The computation based on the earlier year's turnover was therefore sustained.

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Issues: Whether, for the purpose of compounding tax under the Kerala Value Added Tax regime, the dealer's annual turnover could be proportionately reduced by excluding the turnover of a closed branch and whether the application for compounding was liable to be rejected as not in order.

Analysis: The compounding mechanism under Section 8(f)(i) proceeds on the basis of annual turnover, and the governing scheme does not permit splitting up or bifurcation of the assessee's establishment so as to arrive at a proportionate reduction of the previous year's turnover. The fact that one shop had been closed did not justify exclusion of the earlier turnover that had formed part of the dealer's business during the relevant prior year. Rule 11(2) concerns the procedure where an application is not in order, but once the application was entertained and compounding was acted upon, the contention that the authority ought to have rejected the request instead of completing compounding could not be accepted.

Conclusion: The challenge to the assessment and compounding method failed, and the computation based on the earlier year's turnover was upheld.

Ratio Decidendi: Compounding tax under the relevant KVAT provision must be determined on the basis of annual turnover without bifurcation for closed branches, and a dealer who has opted into the composition scheme cannot seek proportionate reduction on that basis.

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