Tax collected by a dealer may be demanded only to the extent still retained after refunds to buyers.

A demand under Rule 4-A(ii) of the Central Sales Tax (Madras) Rules, 1957 can lawfully cover only tax amounts still retained by the dealer. Section 9-A prohibits unauthorised collection of tax, while section 13 authorises rules requiring collected sums to be paid over; the rule was treated as valid and consistent with the Central enactment. The dealer's collection was not shown to be unlawful when D Forms had not been furnished, but amounts already refunded to buyers could not be demanded again. The demand was therefore sustainable only after crediting the refunded sum, not for the full amount originally collected.

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Issues: Whether the authorities could demand from a registered dealer the entire amount collected by way of sales tax under Rule 4-A(ii) of the Central Sales Tax (Madras) Rules, 1957, including the portion already refunded to buyers, and whether the demand had to be limited to the amount still retained by the dealer.

Analysis: Section 9-A of the Central Sales Tax Act prohibits unauthorised collection of tax by a registered dealer and section 13 empowers rule-making under the Act. The rule made by the State Government requiring payment over of amounts collected by way of tax was held to be within the delegated authority conferred by the Central enactment and not inconsistent with any Central rule. The earlier decisions relied on by the petitioners were distinguished because they dealt with State legislative competence under a different statutory setting. On the facts, the petitioners had collected tax when the buyers had not furnished the D Forms, so the collection at the relevant time was not shown to be unlawful. However, the petitioners had already refunded part of the amount, and that refunded sum was no longer available with them.

Conclusion: The demand was legally sustainable only to the extent of the amount remaining with the petitioners after giving credit for the refunded sum, and was not sustainable for the full amount originally collected.

Ratio Decidendi: A demand for tax collected by a dealer under the Central Sales Tax regime can extend only to the amount still retained by the dealer, and must account for amounts already refunded to purchasers.

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