Ultra vires tax levy upheld in challenge, but writ refund refused where unjust enrichment and factual inquiry remained unresolved

Section 25A of the Bihar Finance Act, 1981 was treated as ultra vires because the Full Bench ruling had already removed its statutory basis, so the challenge to the levy succeeded. Refund of tax collected under that provision was not directed in writ jurisdiction, because entitlement depended on disputed facts, including whether the tax burden had been passed on to consumers and whether unjust enrichment applied. Although tax collected without authority of law is refundable in principle under Article 265, the Court held that the petitioners must establish the factual basis for refund before the proper forum, including the statutory refund mechanism where appropriate.

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Issues: (i) whether section 25A of the Bihar Finance Act, 1981 was valid; (ii) whether refund of tax realised under that provision could be directed in writ jurisdiction.

Issue (i): whether section 25A of the Bihar Finance Act, 1981 was valid.

Analysis: The provision had already been held ultra vires by a Full Bench decision, and the present batch of writ petitions was covered by that ruling. Once the statutory basis for levy under section 25A was removed, the petitions challenging tax collection under that provision no longer survived for substantive adjudication on the levy issue.

Conclusion: Section 25A of the Bihar Finance Act, 1981 was treated as ultra vires, and the challenge to its validity succeeded.

Issue (ii): whether refund of tax realised under that provision could be directed in writ jurisdiction.

Analysis: Article 265 of the Constitution of India permits collection of tax only by authority of law, so unlawfully collected tax is refundable in principle. However, the Court held that the present refund claim depended on disputed questions of fact, particularly whether the tax burden had been passed on to consumers, which raised the doctrine of unjust enrichment. The Court also noted that the statutory refund mechanism under section 42 of the Bihar Finance Act, 1981 was available in appropriate cases, but the petitioners would need to establish the factual basis for refund before the proper forum.

Conclusion: No refund was directed in writ jurisdiction, and the petitioners were left to pursue the appropriate forum.

Final Conclusion: The challenge to the levy under section 25A succeeded, but the prayer for immediate refund was rejected because it required factual inquiry and could not be adjudicated on the writ record.

Ratio Decidendi: A tax collected without authority of law is refundable in principle, but refund will not be ordered in writ jurisdiction where entitlement depends on disputed facts or where passing on of the burden may attract unjust enrichment.

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