Tax exemption for contingency deposits denied where invoice amounts were linked to potential liability and not treated as non-collectible tax.

Section 10 of the Central Sales Tax (Amendment) Act, 1969 granted exemption only where tax was not collected because it could not legally be levied or collected. On the facts, the amounts charged from buyers were reflected in the invoices and linked to possible tax liability, so they were not true contingency deposits held pending determination of liability. The retrospective amendment also defeated the argument that the receipts fell outside tax collection. The Kerala HC therefore held that the dealer was not entitled to the exemption, and the assessment and recovery proceedings remained undisturbed.

---

---

Issues: Whether the dealer was entitled to exemption under section 10 of the Central Sales Tax (Amendment) Act, 1969, on the footing that the amounts taken from buyers were only contingency deposits and no tax had been collected on the ground that no tax could have been levied or collected.

Analysis: Exemption under section 10 required two conditions to coexist: the dealer must not have collected tax in respect of the sales, and the non-collection must have been on the ground that such tax could not have been levied or collected. The inclusion of the tax amounts in the invoices and the manner in which the receipts were linked to possible tax liability showed that the amounts were not withheld on the footing that tax was not collectible at all. The retrospective amendment also negatived the contention that the receipts remained mere deposits beyond the reach of tax liability. The principle applicable to true deposits held as custodian pending determination of liability did not assist the dealer on these facts.

Conclusion: The dealer was not entitled to exemption under section 10.

Final Conclusion: The writ petition failed and the revenue's appeal succeeded, leaving the assessment and recovery proceedings undisturbed.

Ratio Decidendi: Exemption under section 10 of the Central Sales Tax (Amendment) Act, 1969 is available only when non-collection of tax is attributable to the belief that no tax could legally be levied or collected; amounts taken in anticipation of tax liability do not qualify.

---