State recovery of tax-collected amounts fails where no underlying tax liability exists under the taxing law.

Section 22(3) of the Madras General Sales Tax Act, 1959 was considered in the context of amounts collected from purchasers as sales tax when no tax was legally payable. Applying the principle from the Supreme Court's interpretation of an in pari materia provision, the State could not treat such collections as recoverable tax merely because they were collected under that label. Where no tax liability existed, the dispute remained between dealer and purchaser, and the recovery power could not be sustained as incidental or ancillary to the taxing power. The provision was held beyond legislative competence, and the demand against the assessee failed.

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Issues: Whether section 22(3) of the Madras General Sales Tax Act, 1959, empowered the State to require payment over to the Government of amounts collected by way of sales tax when no sales tax was payable.

Analysis: The provision was considered in the light of the Supreme Court's ruling on an in pari materia provision in the Hyderabad General Sales Tax Act, 1950. The governing principle was that where a dealer collects an amount from a purchaser without authority under the taxing law, the matter is between dealer and purchaser, and the State cannot, by legislation, treat such amount as recoverable tax merely because it was collected as tax. The power to recover could not be justified as incidental or ancillary where the legislature otherwise lacked competence to authorise such recovery.

Conclusion: Section 22(3) was held beyond the legislative competence of the State Legislature, and the demand against the assessee could not be sustained.

Final Conclusion: The revision was dismissed and the assessee succeeded on the question of the State's power to recover the amount collected as sales tax.

Ratio Decidendi: The State cannot, in the absence of tax liability, legislate to recover from a dealer amounts collected as tax from purchasers, because such recovery is not authorised by the taxing power and cannot be sustained as an incidental or ancillary legislative measure.

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