Compounded tax for a new branch is limited to the period it actually operated during the assessment year.

Under the compounded-tax scheme in Section 8(f) of the Kerala Value Added Tax Act, 2003, branch liability is worked out through the prescribed formula, but taxation must still conform to Article 265 and the charging provision in Section 6. Where a new branch is opened mid-year and the provision does not expressly cover that situation, tax can be levied only for the period the branch actually existed and carried on business. The demand for compounded tax for the full assessment year was therefore unsustainable to that extent, and the assessment required fresh computation for the operational period only.

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Issues: Whether the newly opened branch was liable to compounded tax for the full assessment year or only for the period during which it actually functioned during that year.

Analysis: The statutory scheme under Section 8(f) of the Kerala Value Added Tax Act, 2003 requires a dealer who opts for compounded tax to follow the prescribed formula, and the liability in respect of branches is worked out with reference to the principal place of business. At the same time, the levy of tax must conform to Article 265 of the Constitution of India and to the charging provision under Section 6 of the Act, so tax can be imposed only when a taxable event occurs. The provision did not expressly deal with a branch opened mid-year, and the liability for such a branch had therefore to be confined to the period during which it existed and carried on business.

Conclusion: The branch was not liable to compounded tax for the entire year; the tax could be levied only for the period it functioned during the assessment year. The assessment order was unsustainable to the extent it demanded full-year tax for the new branch, and fresh assessment was directed accordingly.

Final Conclusion: The challenge to the assessment succeeded in part, with the liability of the newly opened branch restricted to the portion of the year during which it was operational.

Ratio Decidendi: Where a dealer under a compounded-tax regime opens a new branch during the assessment year, the tax formula may be applied only for the period the branch actually carries on business, since tax levy and collection must be confined to the existence of a taxable event.

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