Tax adjustment against Central sales tax demand permitted where revenue's long-standing collection practice made pay-and-refund unreasonable.

The court held that, although the statutory scheme normally required payment of State tax and Central sales tax followed by a refund claim for the State tax component, the revenue's long-standing practice of collecting only the State tax and the difference between State tax and Central sales tax justified a different treatment. Because this practice had continued for the relevant assessment year and the demand period had long expired after revocation of the exemption notification, insisting on fresh payment and immediate refund was considered unreasonable. The amount already collected was therefore directed to be adjusted against the Central sales tax demand, and the dealer was not required to pay again and seek refund.

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Issues: Whether the amount already collected from the dealer towards State tax and the difference between State tax and Central sales tax could be adjusted against the subsequent demand for Central sales tax for the same assessment year, instead of insisting on payment followed by refund.

Analysis: The statutory scheme contemplated payment of both State tax and Central sales tax, with the State tax thereafter being claimed by way of refund. That procedure was the normal legal position. However, the authorities themselves had, over a period of years, collected only the State tax together with the difference between the State tax and the Central sales tax, and this practice had continued for the relevant assessment year despite revocation of the earlier exemption notification. In the peculiar circumstances, and having regard to the long lapse of time after the demand period, insisting on a fresh payment and immediate refund was treated as unreasonable.

Conclusion: The amount already paid was directed to be adjusted towards the Central sales tax demand, and the dealer was not required to pay it again and claim refund.

Ratio Decidendi: Where the revenue has itself collected tax in a particular manner over time and the demand period has long since expired, the court may direct adjustment of the amount against the statutory demand instead of enforcing a formal pay-and-refund procedure, in the interest of fairness and practical justice.

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