Compounding under sales tax law cannot be avoided for later months merely because business activity ceased during the period.

An assessee that voluntarily opts for compounding under the Kerala General Sales Tax Act remains bound by the statutory method of computation for the relevant months. Liability is fixed by the higher of the two prescribed formulas, and it cannot be avoided merely because there were no purchases or sales after cancellation of the licence. Where the alternative formula continues to produce tax payable by reference to the prescribed percentage of the previous three years' turnover, the compounded tax liability persists for the period in question.

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Issues: Whether an assessee who had opted for compounding under section 7(1) of the Kerala General Sales Tax Act, 1963 could avoid liability for the relevant months on the ground that there were no purchases or sales after cancellation of the licence.

Analysis: The compounding scheme under section 7(1) fixes tax by reference to the higher of the amounts worked out under clauses (a) and (b). The absence of purchases or sales for the later months did not the assessee's liability, because the tax payable still had to be determined under clause (b) with reference to the prescribed percentage of the turnover of the previous three years. The assessee had voluntarily chosen the compounded method and could not withdraw from the statutory consequences of that election merely because business operations had ceased during the period in question.

Conclusion: The assessee remained liable to pay tax at the compounded rate for the relevant months, and the revision was allowed in favour of the Revenue.

Ratio Decidendi: Where an assessee has opted for compounding under a statutory scheme that determines liability by the higher of two prescribed formulas, liability cannot be avoided merely because there were no purchases or sales during the period in question if the alternative formula continues to yield tax payable.

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