1958 (10) TMI 30 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Refund of sales tax deposited on forward transactions.
2. Applicability and effect of Section 8-A(4) of the U.P. Sales Tax Act.
3. Competence of the U.P. Legislature to enact Section 8-A(4).

Detailed Analysis:

1. Refund of Sales Tax Deposited on Forward Transactions:
The core issue revolves around whether sales tax paid on forward transactions, which were later declared ultra vires, is refundable. The court examined multiple scenarios:
- Dealers paying from their own pockets without recovering from customers: The tax is refundable as there are no circumstances that would disentitle the dealer from claiming the refund.
- Taxes debited in accounts but not recovered from customers: The tax is refundable under the same logic as above.
- Taxes actually recovered from customers: The court held that the tax is refundable even if it was recovered from customers. The Supreme Court's interpretation of Section 72 of the Indian Contract Act supports this, stating that money paid by mistake, either of fact or law, is recoverable. The court emphasized that equitable considerations do not override the clear provisions of Section 72.

2. Applicability and Effect of Section 8-A(4) of the U.P. Sales Tax Act:
The court addressed whether Section 8-A(4) requires dealers to deposit amounts realized as tax on transactions that are not actual sales:
- Interpretation of "as tax on sale of any goods": The court concluded that Section 8-A(4) applies only to amounts realized as tax on actual sales, not on transactions mistakenly treated as sales. Since forward transactions were not sales, amounts collected as tax on such transactions do not fall under Section 8-A(4).
- Legal implications: The court rejected the argument that dealers must deposit these amounts in the treasury, as the provision does not apply to ultra vires transactions.

3. Competence of the U.P. Legislature to Enact Section 8-A(4):
While the court did not need to express an opinion on the legislative competence, it implied that the provision's applicability was moot given the primary interpretation that forward transactions were not sales and thus not subject to the disputed section.

Conclusion:
The court answered the re-formulated questions affirmatively, determining that:
- Taxes on forward transactions are refundable regardless of whether they were recovered from customers.
- Section 8-A(4) of the U.P. Sales Tax Act does not apply to amounts realized as tax on forward transactions.
- No period of limitation exists for claiming such refunds under the U.P. Sales Tax Act.

The Commissioner, Sales Tax, U.P., was ordered to pay the costs of the assessee, assessed at Rs. 500. References were answered accordingly.