Sales tax deposit not treated as tax collection, preserving exemption under a retrospective notification.

A dealer's receipt described in the bill as a sales tax deposit, supported by a letter of indemnity and later refunded, was treated as a contingent deposit rather than tax collection. Because the amount was intended to secure liability in the event of retrospective tax legislation, it did not amount to sales tax collected on the sale. The Madras HC noted that the relevant exemption notification applied where no tax had been collected during the specified period. On those facts, the dealer satisfied the notification condition and remained entitled to exemption under the Pondicherry General Sales Tax Act.

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Issues: Whether the amount collected by the dealer on the sale date was a collection of sales tax or merely a deposit, and whether the dealer was entitled to exemption under the Government notification issued under the Pondicherry General Sales Tax Act.

Analysis: The transaction occurred during the interval when no sales tax law was in force, but the later Act was given retrospective effect and the Government issued a notification exempting sales and purchases during the relevant period if no tax had been collected. The amount was described in the bill as a sales tax deposit, was supported by a letter of indemnity, and was intended to secure recovery under the contingency of future legislation. The later refund of the amount also showed that the parties did not intend it to be treated as tax. On these facts, the amount could not be regarded as sales tax collected by the dealer. The authorities relied on cases concerning unauthorised levy and statutory waiver, but those decisions did not control a case where the question was whether the transaction fell within a valid exemption notification.

Conclusion: The amount was only a deposit and not tax collection, so the dealer satisfied the condition in the exemption notification and was entitled to exemption.

Ratio Decidendi: Where money received on a sale is shown and intended as a deposit to secure a contingent liability, and not as tax collection, it does not amount to tax collected so as to disqualify the dealer from an exemption notification conditioned on non-collection of tax.

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