Tax on exempt turnover cannot be claimed by the State where amounts retained were not lawfully leviable under the Act.

Amounts retained by a sales commission agent from payments due to non-resident principals could not be treated as tax payable to the State where the underlying transactions were exempt from sales tax. Tax under the Hyderabad General Sales Tax Act, 1950 meant only tax lawfully leviable and collected under the Act, and section 11(2) applied only to excess tax collected with legal authority. Because the relevant turnover was admitted to be non-taxable, the State had no authority to demand the retained sums, and Article 265 of the Constitution reinforced that no tax may be levied or collected except by authority of law. Any contractual refund condition did not alter the position.

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Issues: Whether amounts retained by a sales commission agent from moneys payable to non-resident principals, in respect of transactions not liable to sales tax, could be remitted to the State as tax under the Hyderabad General Sales Tax Act, 1950.

Analysis: The amounts withheld were not tax merely because they were retained under a doubtful liability. Tax, for the purpose of the Act, meant tax lawfully leviable under the Act, and only such excess tax as was lawfully leviable and collected by the dealer could be payable to the Department under section 11(2). Where the relevant turnover was admitted to be exempt from levy, the State had no authority to demand payment of the retained sums. Article 265 of the Constitution of India reinforced the position that no tax can be levied or collected except by authority of law. The existence or absence of an express contractual refund condition did not alter the position that the amounts were not payable to the State, though they remained refundable to the principals.

Conclusion: The retained amount attributable to non-resident principals was not payable to the State and the appellant was entitled to relief to that extent.

Ratio Decidendi: Money retained by a dealer from exempt transactions cannot be treated as tax payable to the State unless it is tax lawfully leviable under the governing statute and collected with authority of law.

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