State power limits on sales tax refunds: invalid validation provisions could not compel deposit of unlawfully collected amounts.

A State Legislature cannot, under the sales tax power or allied legislative entries, validate or compel deposit and refund of amounts collected by a dealer as tax but not legally due as tax. Section 17 of the U.P. Sales Tax (Amendment and Validation) Act, 1971 was dependent on and inseverable from section 15, because it merely treated earlier deposits as deposits under the substituted refund machinery in section 29-A. As the subject did not fall within entry 54 of List II and the broader reliance on entries 6, 7 and 10 of List III was rejected, sections 15 and 17 were unconstitutional and the petitioners were entitled to refund under the assessment orders.

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Issues: Whether the State Legislature had competence to enact section 17 of the U.P. Sales Tax (Amendment and Validation) Act, 1971, and whether sections 15 and 17 of that Act were constitutionally valid.

Analysis: Section 17 was held to be dependent on section 15 and inseverable from it, because it merely deemed prior deposits under the principal Act to be deposits under the substituted refund machinery. The substituted section 29-A, introduced by section 15, required amounts realised as tax but not lawfully due to be deposited in the treasury and refunded to the person from whom they were actually realised. The subject was found not to relate to tax on the sale of goods within entry 54 of List II, and the reliance on entries 6, 7, and 10 of List III was rejected in the light of the controlling Supreme Court decision holding that the State had no power to legislate for recovery of amounts unlawfully collected by a dealer.

Conclusion: The State Legislature lacked competence to enact the impugned provisions. Sections 15 and 17 were unconstitutional.

Final Conclusion: The petitions succeeded, and the petitioners were entitled to refund of the amounts due under the assessment orders in accordance with the judgment.

Ratio Decidendi: A State Legislature cannot, under the head of sales tax or under entries relating to contracts, transfer of property, or trust, validate or compel deposit and refund of amounts collected by a dealer as tax but not legally due as tax; ancillary provisions inseverable from such an invalid enactment fall with it.

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