Refund of tax collected under an ultra vires levy can survive limitation where the demand was never lawfully due.

Tax collected on forward contracts under an ultra vires levy is refundable because money received without authority of law offends Article 265 and attracts restitution under section 72 of the Indian Contract Act. The general law of limitation does not defeat refund where the amount was never lawfully due and the assessee acted promptly after the illegality became known. The statutory refund scheme was also read as permitting consequential relief, and procedure was not used to retain money the State had no legal right to keep. On those facts, the revisional authority was justified in entertaining the claim and directing refund.

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Issues: (i) Whether sales tax collected on forward contracts under an ultra vires levy was refundable to the assessee notwithstanding the general law of limitation; (ii) Whether the revisional authority was justified in entertaining the refund claim and directing refund on the facts of the case.

Issue (i): Whether sales tax collected on forward contracts under an ultra vires levy was refundable to the assessee notwithstanding the general law of limitation.

Analysis: The levy on forward contracts had earlier been held beyond legislative competence, so the tax was collected without authority of law. Article 265 of the Constitution of India forbids collection of tax except by authority of law, and money collected under mistake of law falls within the restitutionary principle embodied in section 72 of the Indian Contract Act, 1872. The Act itself recognised refund in cases of excess realisation, and there was no express bar preventing refund of an amount never lawfully due. In the circumstances, the claim could not be defeated merely by resort to technical limitation when the assessee acted promptly after the legal position became known.

Conclusion: The tax was refundable to the assessee, and the limitation objection did not defeat the claim on the facts found.

Issue (ii): Whether the revisional authority was justified in entertaining the refund claim and directing refund on the facts of the case.

Analysis: The statutory scheme under section 11(3) of the U. P. Sales Tax Act, 1948 and the refund provisions of the Act did not prohibit the revisional authority from granting consequential relief where the assessment rested on an ultra vires levy. The application was not shown to suffer from such delay as would bar relief in the circumstances, and the claim had arisen only after the illegality of the levy became clear. The court emphasised that procedure should serve justice and should not be used to withhold money that the State had no legal right to retain.

Conclusion: The revisional authority was justified in entertaining the claim and directing refund.

Final Conclusion: The appeals failed because the assessee was held entitled to refund of the tax illegally collected on forward contracts, and the order directing refund was sustained.

Ratio Decidendi: Money collected as tax without authority of law is refundable under the restitutionary principle, and where the statute contains no effective bar, procedural limitation should not be used to deny refund of an amount never lawfully due.

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