Mistake of law refund rights apply to tax on forward transactions; deposit provision for sales tax was held inapplicable.

Money paid under a mistake of law is recoverable under section 72 of the Indian Contract Act, 1872, and that right is not lost merely because the payment was voluntary or the dealer had recovered the amount from customers; no estoppel, waiver or limitation bar was shown. On that basis, tax deposited on forward transactions was treated as refundable. Section 8-A(4) of the U.P. Sales Tax Act was construed as limited to amounts realised as tax on an actual sale, so it did not apply to sums collected on forward transactions that were not sales. The Revenue's reliance on section 8-A(4) therefore failed.

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Issues: (i) Whether sales tax deposited on forward transactions, whether paid from the dealer's own funds or recovered from customers, was refundable after the levy was declared ultra vires; (ii) Whether section 8-A(4) of the U.P. Sales Tax Act applied so as to require deposit of amounts collected on such forward transactions.

Issue (i): Whether sales tax deposited on forward transactions, whether paid from the dealer's own funds or recovered from customers, was refundable after the levy was declared ultra vires.

Analysis: The right to recover money paid by mistake was held to arise under section 72 of the Indian Contract Act, 1872, and that right was not displaced merely because the payment was voluntary or because the assessee had recovered the amount from customers. Equitable considerations could not override the statutory right, and the circumstances suggested by the Revenue did not amount to estoppel, waiver, limitation, or any other legally sufficient bar. The fact that the dealer may have recovered the tax from customers did not destroy the right to refund, though separate rights between dealer and customer were not determined.

Conclusion: The tax deposited on forward transactions was refundable, including where it had been recovered from customers.

Issue (ii): Whether section 8-A(4) of the U.P. Sales Tax Act applied so as to require deposit of amounts collected on such forward transactions.

Analysis: Section 8-A(4) was construed as applying only to amounts realised as tax on an actual sale of goods. Since forward transactions were held not to be sales and the ultra vires enlargement of the word "sale" could not be treated as existing, amounts realised in relation to forward contracts did not fall within the statutory words requiring deposit in the Government treasury. In that view, it was unnecessary to decide the constitutional competence of the provision.

Conclusion: Section 8-A(4) of the U.P. Sales Tax Act did not apply to the amounts realised on forward transactions.

Final Conclusion: The references were answered in favour of the assessee, and the deposited tax on forward transactions was held refundable without the Revenue's reliance on section 8-A(4) succeeding.

Ratio Decidendi: Money paid under a mistake of law is recoverable under section 72 of the Indian Contract Act, 1872, and such statutory right is not defeated by voluntary payment or equitable considerations unless a recognised legal bar such as estoppel, waiver, or limitation is established; a deposit provision tied to tax on a sale does not extend to amounts collected on transactions that are not sales.

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