Voluntary tax paid under mistake of law on closing stock was refundable; pending reassessment did not bar adjustment.

Sales tax paid on closing stock under a mistaken understanding of liability was refundable where the payment was made after the tax incidence on medicines changed by notification and the refund claim was filed within the statutory period. The taxing authority could not retain tax collected without authority of law merely because payment was voluntary, and a pending reassessment did not defeat entitlement to refund or adjustment under section 14 of the Orissa Sales Tax Act. The refusal to grant refund was therefore unsustainable.

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Issues: Whether sales tax voluntarily paid under a mistake of law on closing stock was refundable under section 14 of the Orissa Sales Tax Act.

Analysis: The dealer paid sales tax and additional sales tax on stock of medicines held on 31 December 1977, although a subsequent notification changed the incidence of tax on medicines from the first sale point with effect from 1 January 1978. The payment was made under a mistaken understanding of liability. The refund application was filed within the statutory period and satisfied the requirements of section 14. A taxing authority cannot retain tax realised without authority of law merely because the payment was voluntary, and the existence of a pending reassessment did not defeat the dealer's entitlement to refund or adjustment.

Conclusion: The dealer was entitled to refund or adjustment of the tax paid under mistake of law, and the refusal to grant refund was unsustainable.

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