Refund of cash paid instead of bank guarantee upheld after luxury tax levy was struck down

Cash paid in substitution of a bank guarantee, under a specific assurance that it would be refunded if the levy challenge succeeded, was held refundable once the underlying luxury tax levy was struck down. The court treated the payment as distinct from tax already collected, because it was made only in place of the guarantee that the authorities had originally required. The State could not rely on the same assurance to retain the amount after the levy failed. The refusal to grant refund was therefore unsustainable, and the assessee was entitled to repayment.

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Issues: Whether the amount paid by the assessee in cash in lieu of bank guarantee, pursuant to the authorities' specific assurance that it would be refunded if the challenge to the levy succeeded, was refundable after the levy was struck down.

Analysis: The assessee had been directed only to furnish bank guarantee pending the writ challenge to the luxury tax levy. Instead of insisting on the guarantee, the authorities required cash payment and specifically assured refund if the assessee succeeded. The levy was later invalidated. A bank guarantee is not the same as payment of tax and, had the guarantee been furnished, it could not have been realised once the levy failed. The Court held that the State could not take advantage of its own assurance to retain amounts paid only because of that promise. The objection based on prior decisions concerning refund of tax already collected did not apply on these facts, because the sums here were paid in substitution of a bank guarantee under a specific promise of refund.

Conclusion: The amount paid in cash in lieu of bank guarantee was refundable, and the refusal to grant refund was unsustainable.

Final Conclusion: The assessee was entitled to refund of the amounts paid under the authorities' assurances, and the writ appeal succeeded.

Ratio Decidendi: Money paid in substitution of a bank guarantee, pursuant to a specific assurance of refund and where the underlying levy is ultimately set aside, cannot be retained by the State as tax collection.

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