Mandatory prepayment for belated compounding under the KVAT Act was required, so the dealer could not claim the proviso benefit.

The second proviso to Section 16(2) of the Kerala Value Added Tax Act, 2003 allows a dealer who missed the Section 8 time limit to seek compounding only as a one-time measure and only if the statutory conditions are satisfied. The proviso requires the dealer to remit the tax and interest along with the application, and that requirement is mandatory. As the application in question was belated and was not accompanied by payment of tax and interest, the dealer could not claim the benefit of the proviso. The rejection of the compounding application was therefore upheld.

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Issues: Whether the petitioner was entitled to the benefit of the second proviso to Section 16(2) of the Kerala Value Added Tax Act, 2003 for exercising the option under Section 8 without remitting tax and interest along with the application.

Analysis: The amendment to Section 16(2) operated as a one-time measure to enable dealers who had missed the time limit under Section 8 to seek compounding benefits, but the benefit was expressly made subject to eligibility and to the dealer paying tax under the relevant provision along with interest. The application filed by the petitioner was admittedly belated and no tax with interest was paid along with it. The condition attached to the proviso was mandatory, and the petitioner's contention that payment could await issuance of a provisional form was not accepted.

Conclusion: The petitioner was not entitled to the benefit of the second proviso to Section 16(2), and the rejection of the compounding application was upheld.

Ratio Decidendi: A belated option for compounding under the second proviso to Section 16(2) can be invoked only if the dealer remits the tax and interest required by the proviso along with the application.

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