Appropriation of statutory payments must follow the payer's direction, and unlawful diversion can justify consequential refund relief.

A payment made toward a specified statutory liability must be appropriated in accordance with the payer's direction unless the statute provides otherwise, so sales tax deposits could not be diverted to meet a separate liability under section 8-A(4) of the U.P. Sales Tax Act. Once the appropriation was found unlawful, the resulting excess recovery lacked legal basis, and the revisional authority's wide powers under section 10(3) were held sufficient to grant consequential refund relief. Payment in compliance with a statutory demand did not amount to voluntary acquiescence, and the refund direction was upheld.

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Issues: (i) Whether amounts deposited by the assessee as sales tax could be appropriated by the taxing authority towards liability under section 8-A(4) of the U.P. Sales Tax Act; (ii) whether the revisional authority had jurisdiction to order refund of the amount wrongly appropriated.

Issue (i): Whether amounts deposited by the assessee as sales tax could be appropriated by the taxing authority towards liability under section 8-A(4) of the U.P. Sales Tax Act.

Analysis: The rule of appropriation of payments permits the debtor, at the time of payment, to direct the debt to which the payment is to be applied, and that principle applies equally to statutory debts unless the statute provides otherwise. The assessee had specifically deposited the amount towards its sales tax liability, and no provision was shown authorising the taxing authority to divert that payment to the separate liability under section 8-A(4).

Conclusion: The appropriation of the sales tax deposit towards liability under section 8-A(4) was not permissible.

Issue (ii): Whether the revisional authority had jurisdiction to order refund of the amount wrongly appropriated.

Analysis: Once the appropriation was held invalid, the further demand based on that appropriation lacked authority, and the excess amount stood paid without legal basis. The revisional power under section 10(3) was wide enough to include consequential relief, and the refund order was a proper consequence of the finding that the assessee was not liable to pay the additional amount. The plea of acquiescence was rejected because payment made in compliance with a statutory demand does not amount to voluntary acceptance of the demand.

Conclusion: The revisional authority had jurisdiction to direct refund of the amount wrongly recovered.

Final Conclusion: The reference was answered in the assessee's favour, with the refund order upheld and the taxing authority held bound to respect the assessee's appropriation of payment.

Ratio Decidendi: A payment made towards a specified statutory liability must be appropriated in accordance with the payer's direction, and a revisional authority may grant consequential refund relief within its wide statutory powers where an unlawful appropriation has resulted in excess recovery.

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