Refund of wrongly collected tax cannot fail where the dealer has already returned the money to customers.

Where tax not legally leviable was collected and later refunded to customers by credit notes, the absence of a prescribed refund procedure under section 29-A of the U.P. Trade Tax Act, 1948 did not defeat the dealer's refund claim. The Court noted that the amount had been deposited with the Government, the refund to buyers was not disputed, and the dealer had not retained any undue benefit. It held that a procedural vacuum could not justify the State retaining money not lawfully due as tax, and the refund refusal was unsustainable.

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Issues: Whether the dealer, having realised tax not legally leviable and having refunded the amount to its customers by issuing credit notes before the prescribed refund procedure was framed, was entitled to claim refund from the State under section 29-A of the U.P. Trade Tax Act, 1948.

Analysis: The amount collected as tax was admitted to have been deposited with the Government though no tax was payable on the commodities in question. The dealer subsequently refunded the amount to the buyers by credit notes, and the authorities did not dispute the fact of such refund. Section 29-A required the amount wrongly realised to be refunded to the person from whom it was collected, in the manner prescribed. The Court followed its earlier view that where the prescribed procedure had not yet been framed, the absence of procedure could not defeat a bona fide refund already made to the customers, particularly when the dealer had not retained any undue benefit and the State would otherwise retain money not legally due as tax.

Conclusion: The dealer was entitled to refund, and the refusal by the authorities was unsustainable.

Ratio Decidendi: Where tax not legally leviable is realised and duly refunded by the dealer to the buyers, the absence of a prescribed procedural mechanism under the refund provision does not defeat the dealer's claim for refund from the State.

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