Lawful tax collection limits prevent the State from retaining mistaken collections on non-taxable sales.

A registered dealer could collect only amounts lawfully leviable as tax under the Madras General Sales Tax Act, 1939; sums collected on sales outside the taxable territory were not lawful tax collections. Section 8-B(2) required remittance only of amounts collected by way of tax within the Act's lawful scope, so mistaken collections made without tax liability were not payable over to the Government. Ambiguity in fiscal legislation had to be resolved in favour of the taxpayer. The dealer was therefore entitled to retain the disputed sums as not recoverable by the State and to obtain refund relief.

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Issues: Whether amounts collected by a registered dealer from purchasers as tax, though the underlying sales were not taxable, could be retained by the State under section 8-B(2) of the Madras General Sales Tax Act, 1939, or were refundable to the purchasers and not payable over to the Government.

Analysis: Section 8-B(1) was held to be only an enabling provision permitting a registered dealer to collect, from purchasers, amounts lawfully leviable as tax under the Act. It did not authorise collection of sums which were not legally exigible. Section 8-B(2), read with the scheme of sections 3 and 8-C and the relevant rules and registration conditions, was construed as requiring payment over only of amounts collected by way of tax within the lawful scope of the Act. The Court held that collections made under mistake on sales outside the taxable territory were not collections by way of tax within the meaning of section 8-B(1), and therefore section 8-B(2) did not compel remittance of such unlawful collections to the Government. In fiscal legislation, any ambiguity had to be resolved in favour of the taxpayer.

Conclusion: The assessee was not bound to pay over the disputed collections to the Government under section 8-B(2), and the assessee was entitled to refund relief.

Final Conclusion: The assessment was required to be revised and the petitioner received consequential refund relief with costs.

Ratio Decidendi: A statutory power permitting a dealer to collect tax extends only to amounts lawfully leviable under the taxing statute, and unlawful collections made under mistake cannot be retained by the State under a provision requiring payment over of amounts collected by way of tax.

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