State law on wrongful sales tax collections exceeds legislative competence and cannot be saved as incidental or ancillary legislation.

A State law requiring dealers to deposit in the treasury amounts collected from purchasers as sales tax, even where no tax was legally due, was held outside legislative competence. The measure was not a tax on the sale or purchase of goods under entry 54 of List II, and it could not be sustained as an incidental or ancillary provision to a valid sales tax scheme. Attempts to support it under entries relating to contracts or trusts were rejected because recovery of wrongfully collected tax did not, in pith and substance, amount to such legislation. The validating provision also failed because it depended on the invalid charging provision.

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Issues: Whether section 29-A of the U.P. Sales Tax Act, as substituted by section 15 of the amending Act, and the linked validating provision in section 17 of the amending Act were within the legislative competence of the State Legislature.

Analysis: The impugned provision required a dealer to deposit in the Government treasury amounts realised from purchasers as sales tax even where the amount was not legally exigible as tax. Such a levy was not a tax on sale or purchase of goods within entry 54 of List II, and it could not be supported as a merely incidental or ancillary provision to a valid sales tax law. The reasoning in earlier decisions rejecting similar provisions was applied, and the attempt to sustain the measure under entry 7 of List III or entry 10 of List III was rejected, since recovery of money wrongly collected as tax did not amount to legislation on contracts or trusts in pith and substance. Section 17, being dependent on section 15, could not survive if section 15 was invalid.

Conclusion: The impugned provisions were beyond the State Legislature's competence and were unconstitutional.

Ratio Decidendi: A State law compelling deposit of amounts wrongly collected as sales tax, when such amounts are not themselves exigible as tax, is not covered by the taxing entry for sales tax and cannot be sustained by incidental power or by characterising the measure as one relating to contracts or trusts.

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