Sales tax machinery provisions cannot validate recovery of amounts the State had no legislative competence to levy as tax.

A State sales tax law cannot, under ancillary machinery provisions, compel a dealer to deposit amounts collected from purchasers as tax when the State lacks competence to levy that amount as tax. The Court held that legislative power over sales tax extends to machinery for levy and collection of tax lawfully due, but not to a provision that in substance exacts an amount the State could not otherwise impose. The refund mechanism did not alter the character of the levy, because the amount was not held in trust for purchasers and the scheme remained one for recovery of an unauthorised tax demand. The impugned provisions were struck down as beyond legislative competence.

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Issues: (i) Whether section 20A(3), (4) and (5) of the Bihar Sales Tax Act, 1959 were within the legislative competence of the State Legislature under entry 54 of List II or any other entry; (ii) Whether the impugned provisions were valid as machinery provisions for recovery and refund of amounts collected by a dealer though not legally payable as sales tax.

Issue (i): Whether section 20A(3), (4) and (5) of the Bihar Sales Tax Act, 1959 were within the legislative competence of the State Legislature under entry 54 of List II or any other entry.

Analysis: The provision did not merely regulate levy or collection of tax lawfully due. It authorised the State to compel a dealer to deposit amounts collected from purchasers on the representation that they were payable as tax, even though the dealer was not liable in law to pay or collect them as tax. The power to legislate on sales tax includes machinery for levy and collection of tax actually due, but not a provision which in substance imposes a demand for an amount the State is otherwise not competent to levy. The Court also held that the provision could not be justified under entries 6, 7 or 13 of List III.

Conclusion: Section 20A(3), (4) and (5) was held to be beyond the competence of the State Legislature and therefore invalid.

Issue (ii): Whether the impugned provisions were valid as machinery provisions for recovery and refund of amounts collected by a dealer though not legally payable as sales tax.

Analysis: The refund machinery under sub-section (8) did not change the real character of the levy. The amount, once recovered, went to the State and was not held in trust for the purchaser; the refund mechanism was viewed as only a limited exception and not the true basis of the scheme. Sub-sections (3), (4) and (5) therefore remained a device for collecting an amount in the nature of a tax the State could not lawfully exact.

Conclusion: The refund machinery did not save the impugned levy, and sub-sections (6) and (8) also fell with the invalid provisions.

Final Conclusion: The appeal succeeded, the writ petition was allowed, and the impugned provisions were struck down as unconstitutional for want of legislative competence.

Ratio Decidendi: A State law cannot, under the guise of ancillary tax machinery, compel a dealer to deposit amounts collected from purchasers as tax when the State had no competence to levy that amount as tax; a device cannot cure lack of legislative power.

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