Compounding tax for granite metal units is computed on all crushers used in the business, with separate-unit treatment based on business nature.

Under the Kerala Value Added Tax compounding scheme for granite metal units, tax is computed with reference to the primary and secondary crushers employed by the dealer in the relevant business, so crushers across multiple units operated by the same dealer are reckoned together rather than unit-wise. The Commissioner may also exercise discretion under the separate-units provision by applying the nature of the business as a relevant yardstick. On that basis, granite metal units carrying on the same line of business may be treated as one unit for levy, assessment and collection, and such treatment is not inherently arbitrary or illegal.

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Issues: (i) Whether, for the purpose of compounding tax under Section 8(b) of the Kerala Value Added Tax Act, the crushers in all granite metal units of a dealer are to be reckoned together or unit-wise; (ii) Whether the order under Section 20(3) of the Kerala Value Added Tax Act treating the granite metal units as a single unit was illegal or arbitrary.

Issue (i): Whether, for the purpose of compounding tax under Section 8(b) of the Kerala Value Added Tax Act, the crushers in all granite metal units of a dealer are to be reckoned together or unit-wise.

Analysis: The compounded tax scheme under Section 8(b) is an option available to a dealer producing granite metals with the aid of mechanized crushing machines. The provision requires the dealer to reckon the primary crushers and secondary crushers employed in the business while computing the compounded tax. The computation is therefore linked to the crushers employed by the dealer in the course of the business, and not to the crushers in each individual unit. Where the dealer operates more than one granite crushing unit, all crushers used by the dealer in that business are liable to be taken together for the purpose of the statutory computation.

Conclusion: The crushers in both units were rightly reckoned together, and the challenge to the compounding orders failed.

Issue (ii): Whether the order under Section 20(3) of the Kerala Value Added Tax Act treating the granite metal units as a single unit was illegal or arbitrary.

Analysis: Section 20(3) confers discretion on the Commissioner to treat places of business as separate units for levy, assessment and collection of tax. In exercising that discretion, the Commissioner may apply a relevant yardstick, including the nature of the business carried on. The order under challenge accepted the petitioner's request in respect of other businesses but treated the two granite metal units as one for the purposes of the Act because they related to the same line of business. That exercise of discretion was neither arbitrary nor illegal.

Conclusion: The order treating the granite metal units as a single unit was upheld.

Final Conclusion: The writ petition was rejected, and the assessments and the order under Section 20(3) were sustained.

Ratio Decidendi: Under the compounding scheme, the tax liability is determined with reference to the crushers employed by the dealer in the relevant business, and the Commissioner's discretion to treat places of business as separate units may validly be exercised on the basis of the nature of the business.

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