Invalid tax retention mechanism cannot be enforced; fixed-deposit amount must be released to the taxpayer.

Where the statutory provision authorising deduction and retention of tax at source, together with the related fixed-deposit mechanism, had already been declared invalid, there was no legal basis to continue withholding the money collected under that scheme. The Kerala HC held that the amount kept in fixed deposit could not be retained once the underlying authority had ceased to exist, and it had to be released to the person from whom it was collected. The petitioner was therefore entitled to withdraw the deposit by endorsement of the fixed deposit receipts in its favour.

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Issues: Entitlement of the petitioner to withdraw the amount collected and kept in fixed deposit under section 7(7) of the Kerala General Sales Tax Act, 1963 read with rule 22-A of the Kerala General Sales Tax Rules, 1963, after the said provisions were declared invalid.

Analysis: The petitioner's claim was founded on the declaration that the statutory mechanism under which tax was being deducted at source and retained in joint fixed deposit had already been held invalid by the Court. Once the foundation for collection and retention of the amount ceased to exist, there was no legal basis to continue withholding the deposit from the petitioner.

Conclusion: The petitioner was entitled to withdraw the amount by endorsement of the fixed deposit receipts in its favour.

Ratio Decidendi: Where the statutory provision authorising deduction and retention of tax is declared invalid, the amount held under that mechanism cannot be retained and must be released to the person from whom it was collected.

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