Refund of invalid sales tax levy upheld: money collected under an ultra vires tax is recoverable as a mistake of law.

Money collected under a sales tax levy later declared ultra vires was refundable as money paid under a mistake of law, and the authorities could not rely on the invalid levy to deny relief. Article 96 of the First Schedule to the Indian Limitation Act, 1908 did not govern such refund proceedings, and section 29 of the U.P. Sales Tax Act did not apply because the claim arose from a constitutionally invalid levy rather than a lawful payment under the Act. The revising authority was also justified in entertaining revision against the order refusing refund, with limitation running from service of that refusal order. The assessee's right to refund was upheld.

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Issues: (i) Whether a refund of sales tax paid on forward transactions was maintainable when the levy had been declared ultra vires and the payment was made under a mistake of law. (ii) Whether article 96 of the First Schedule to the Indian Limitation Act, 1908 or section 29 of the U.P. Sales Tax Act barred the refund claim. (iii) Whether the revising authority was justified in entertaining the revision against the order refusing refund.

Issue (i): Whether a refund of sales tax paid on forward transactions was maintainable when the levy had been declared ultra vires and the payment was made under a mistake of law.

Analysis: The payment was made in respect of a levy later declared by the Supreme Court to be beyond legislative competence. Money collected under a provision held ultra vires is treated as having been paid without lawful authority, and the principle in section 72 of the Indian Contract Act, 1872 applies where money is paid by mistake. The authorities under the Act were bound to give effect to the declaration of law and could not treat the invalid levy as the basis for denying refund.

Conclusion: The assessee was entitled to refund of the amount deposited towards the invalid levy.

Issue (ii): Whether article 96 of the First Schedule to the Indian Limitation Act, 1908 or section 29 of the U.P. Sales Tax Act barred the refund claim.

Analysis: Article 96 governs suits and does not regulate refund proceedings under the sales tax statute. Section 29 applies to payments made under the Act or pursuant to orders made under the Act, and the claim here related to sums collected on a constitutionally invalid basis, not to money lawfully payable under the Act. The statutory refund machinery therefore did not control the claim, and the limitation provision in section 29 was inapplicable on these facts.

Conclusion: Neither article 96 nor section 29 barred the refund claim.

Issue (iii): Whether the revising authority was justified in entertaining the revision against the order refusing refund.

Analysis: The revision was directed against the order rejecting the refund application, not against the original assessment order. Since that refusal order was passed in the course of proceedings for refund after the Supreme Court had declared the levy invalid, it was an order amenable to revision within the statutory period computed from service of that refusal order. The date of the original assessment order was not the governing date for limitation of the revision.

Conclusion: The revising authority was justified in entertaining the revision.

Final Conclusion: The reference was answered in a manner that upheld the assessee's right to refund and sustained the revisional order granting relief.

Ratio Decidendi: When a tax levy is declared ultra vires, money collected under it is refundable as money paid under a mistake of law, and limitation provisions confined to suits or to payments made under a valid statutory levy do not defeat the refund claim or the revisional remedy against refusal of refund.

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