Retrospective sales tax exemption bars recovery where collected tax on jaggery sales was fully refunded to purchasers.

Retrospective exemption under section 6 of the Madras General Sales Tax Act meant the dealer had no right to retain sales tax collected on jaggery sales for the covered period. Because the dealer proved that the entire collected amount had been refunded to purchasers before recovery was sought, no tax amount remained in its hands that could be recovered by the State under section 8-B(2). Recovery could not be sustained merely on the basis of an earlier collection already returned to buyers, so the departmental revision failed.

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Issues: Whether the assessee was liable to remit to the State the sales tax initially collected on jaggery sales but subsequently refunded to the purchasers after the exemption notification took effect.

Analysis: The exemption notification issued under section 6 of the Madras General Sales Tax Act operated retrospectively from 1 April 1958, so the assessee had no right to retain tax collected on jaggery sales for the relevant period. Once the assessee established that the entire collected amount had been repaid to the purchasers, there remained no tax amount in its hands that could be called for by the State under section 8-B(2) of the Act. The fact of refund was treated as legally significant, because the assessee could not be fastened with liability merely on the basis of an earlier collection that had already been returned.

Conclusion: The assessee was not liable to pay the refunded amount to the State and the departmental revision failed.

Ratio Decidendi: Where tax collected from purchasers has been fully refunded before the State seeks recovery, no amount remains in the dealer's hands within the meaning of section 8-B(2) of the Madras General Sales Tax Act, and recovery cannot be sustained.

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