State sales tax power may validly regulate wrong tax collections and attach limitation to statutory refund claims.

Section 20A of the Bihar Sales Tax Act was treated as a valid exercise of State sales tax power under Entry 54 of List II, because the Legislature could regulate the deposit and refund of amounts wrongly collected as sales tax and provide incidental machinery for that purpose. The challenges based on fundamental rights, the Contract Act and alleged colourable legislation were rejected. The limitation period attached to the statutory refund remedy was also upheld, since a claimant invoking a legislatively created refund right must accept the conditions and time limits imposed by the statute.

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Issues: (i) Whether section 20A of the Bihar Sales Tax Act, 1959, was ultra vires the Constitution or beyond the legislative competence of the Bihar Legislature insofar as it required dealers to deposit sums collected as sales tax though not legally payable. (ii) Whether the limitation restriction for claims by purchasers for refund under section 20A was invalid.

Issue (i): Whether section 20A of the Bihar Sales Tax Act, 1959, was ultra vires the Constitution or beyond the legislative competence of the Bihar Legislature insofar as it required dealers to deposit sums collected as sales tax though not legally payable.

Analysis: The provision was held to operate in the field of sales tax legislation under Entry 54 of List II and to be supported by the incidental and ancillary powers of the State Legislature. The Court treated the Bihar provision as substantially similar to the refund-related provision upheld in the Orissa sales tax legislation and relied on the principle that where tax is wrongly collected, legislation may validly regulate its deposit and refund machinery. The challenge based on fundamental rights, the Contract Act, and alleged colourable legislation was rejected.

Conclusion: Section 20A was upheld as valid and the challenge failed.

Issue (ii): Whether the limitation restriction for claims by purchasers for refund under section 20A was invalid.

Analysis: The Court held that when the statute creates a statutory right to refund, it may also attach a limitation period for enforcement of that right. The restriction was treated as part of the enforceable statutory scheme and not as an independent ground of invalidity. The principle applied was that a claimant invoking the statutory remedy must accept the statutory conditions attached to it.

Conclusion: The limitation provision was held valid.

Final Conclusion: The constitutional and competence challenge to section 20A failed, and the refund claims were left to be pursued only within the statutory framework provided by the Act.

Ratio Decidendi: A State law made under the sales tax entry may validly regulate the deposit and refund of amounts wrongly collected as tax, and may attach a limitation period to the statutory refund remedy, as such provisions are incidental to the taxing power.

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