M.U. Isaac, J.
1. The petitioner is a dealer in rubber and hill produces. He purchases rubber within the State and sells it mostly inter-State. His main customer is Messrs Dunlop India Ltd. Rubber is taxable under the Kerala General Sales Tax Act, 1963, at the point of last purchase in the State. In State of Mysore v. Lakshminarasimhiah Setty & Sons [1965] 16 S.T.C. 231 (S.C.), the Supreme Court held that if sales tax is not charged under a law of a State at the point of sale, no tax can also be chargeable on inter-State sales under the Central Sales Tax Act, 1956. This decision was rendered on 10th November, 1964. However the petitioner collected sales tax on inter-State sales of rubber. On 9th June, 1969, the Vice-President acting as President of India promulgated the Central Sales Tax (Amendment) Ordinance (4 of 1969). This was repealed and replaced by the Central Sales Tax (Amendment) Act, 1969, which came into force on 30th August, 1969. Both the Act and the Ordinance contained more or less similar provisions. One of them is that a dealer shall be liable to pay tax under the Central Sales Tax Act on sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable under the sales tax law of the appropriate State if that sale had taken place inside the State. This provision is made retrospective with effect from 1st October, 1968. Section 10 of the Amendment Act, which corresponds to Clause 10 of the Ordinance, deals with exemption from tax liability in certain cases. It reads :
10. Exemption from liability to pay tax in certain cases.--(1) Where any sale of goods in the course of inter-State trade or commerce has been effected during the period between the 10th day of November, 1964, and the 9th day of June, 1969 and the dealer effecting such sale has not collected any tax under the principal Act on the ground that no such tax could have been levied or collected in respect of such sale or any portion of the turnover relating to such sale and no such tax could have been levied or collected if the amendments made in the principal Act by this Act had not been made, then, notwithstanding anything contained in Section 9 or the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale.
(2) For the purposes of Sub-section (1), the burden of proving that no tax was collected under the principal Act in respect of any sale referred to in Sub-section (1) or in respect of any portion of the turnover relating to such sale shall be on the dealer effecting such sale.
2. During the year 1967-68, the petitioner collected Rs. 8,112.92 from Messrs Dunlop India Ltd. and Rs. 773.72 from other parties as tax on inter-State sales. Messrs Dunlop India Ltd. called on the petitioner to refund to them the above amount, on the ground that tax was not payable on such sales in the light of the above decision of the Supreme Court. The petitioner returned the amount on 22nd January, 1969, by a cheque on the Central Bank of India and paid the balance tax of Rs. 773.72 to the State-Government. The Sales Tax Officer, Palai, the third respondent called upon the petitioner by letter, exhibit P-1 dated 23rd July, 1969, to pay to the State Government the amount of Rs. 8,112.92, which the petitioner collected from Messrs Dunlop India Ltd. The petitioner replied stating that the amount had been returned to Messrs Dunlop India Ltd., under the circumstances stated above, and that he was not liable to pay the said amount. In the meanwhile, the third respondent assessed the petitioner by order, exhibit P-6 dated 29th July, 1969, assessing the petitioner on the inter-State sale of rubber, and calling upon him to pay the balance tax of Rs. 8,112.92. Admittedly this represents the amount which he collected from Messrs Dunlop India Ltd., and which he returned to them on 22nd January, 1969, as required by them. The petitioner's objection against the enforcement of the above demand was not heeded to by the third respondent. Thereupon the petitioner filed this writ petition to quash exhibit P-6.
3. The petitioner has raised several grounds in this petition against the sustainability of the above demand. The main contention urged by the petitioner's counsel is that by virtue of Section 10 of the Amendment Act, he is not liable to pay the amount which he collected as tax from Messrs Dunlop India Ltd., as he returned it in the light of the Supreme Court decision before the Ordinance and the Amendment Act came into force. The whole question depends on a construction of Section 10, which I have quoted above. The facts of the case are not in dispute. The petitioner collected Central sales tax at a time when the inter-State sale of goods was not liable to tax by virtue of the decision of the Supreme Court in State of Mysore v. Lakshminarasimhiah Setty & Sons [1965] 16 S.T.C. 231 (S.C.). So the collection of the said tax was unauthorised; and Messrs Dunlop India Ltd. demanded return of the amount collected from them. The petitioner was bound to return the same; and he did so before the Ordinance came into force. Counsel for the petitioner contends that the petitioner is entitled to the exemption under Section 10 of the Amendment Act, while the learned Government Pleader submits that the case does not fall within the said section. According to the Government Pleader, this is not a case where the dealer has not collected tax, and he is not, therefore, entitled to the exemption; it is irrelevant whether he returned to the purchaser what he collected or when he did so. According to the petitioner's counsel, return of an amount wrongly collected has the same effect of having not collected it at all. I am inclined to accept this contention for more than one reason. If an amount is wrongly received, either it be under a mistake of law or under a mistake of fact, it is the duty of the receiver and it also creates a legal liability on him to return the said amount. The fact that he discharged that duty or liability cannot place him under a disadvantage. What he does is only to rectify an error which occurred; and the error does not exist after it is rectified. It also appears to me that the legislative intent of Section 10 of the Amendment Act was to exempt all dealers who had not with them any amount collected by them as sales tax between the two dates mentioned therein, namely, date on which the Supreme Court decision was pronounced and the date on which the Ordinance was promulgated. The tax liability was imposed with retrospective effect by the Ordinance; and if, before the date of the Ordinance, any dealer has got the amount with him which he collected as tax, he must pay it; because it is consistent with the liability imposed retrospectively. On the other hand, if a dealer has not got any such amount--it may be either due to the fact that he did not collect it, or that he returned what he wrongly collected--he is exempted from the liability. I cannot find any rational basis for differentiating a person who did not make a wrong collection from one who made a wrong collection and returned the same to rectify the mistake, in the matter of the exemption granted under Section 10 of the Act. Such a differentiation would be unconstitutional; and I must presume that Parliament would not intend it.
4. Counsel for the petitioner referred me to a Division Bench decision of the Madras High Court in Kathan Nadar Co. v. State of Madras [1963] 14 S.T.C. 694 in support of his contention that the effect of refunding an amount wrongly collected by way of tax is the same as not having collected it. In that case, sales tax was collected by a dealer under the Madras General Sales Tax Act, 1939, though the sale of the goods concerned was exempt from tax. The amount was returned by the dealer to the person from whom it was collected, when it was demanded by him. Section 8-B(2) of the Madras General Sales Tax Act, 1939, reads as follows :
Every person who has collected or collects any amount by way of tax under this Act, on or after the 1st day of April 1947, shall pay over to the State Government within such time and in such manner as may be prescribed, all amounts so collected by him if they are in excess of the tax, if any, paid by him for the period during which the collections were made; and, in default of such payment, the amounts may be recovered as if they were arrears of land revenue.
The assessing authority called upon the dealer by virtue of the above section to pay to the Government the amount collected by him, in spite of the fact that he had rightly refunded it to the person from whom it was collected. The Board of Revenue upheld the demand, holding that the dealer was bound to pay the amount to the State, when once he collected it, and that the fact that he subsequently returned it to the person from whom it was wrongly collected did not make any difference. In revision, the Madras High Court set aside the demand, holding that:
The effect of the refund of the amount of tax collected by the petitioner from its purchasers, is as if the petitioner had not made any initial collection of sales tax.
I respectfully agree with the above view. The wording of Section 8-B of the Madras Act, in so far as it relates to the contention advanced before me in the instant case, is similar to that of Section 10 of the Amendment Act. So the above decision supports the petitioner; and he is entitled to succeed on this ground.
5. In the light of my above conclusion, it is unnecessary for me to consider the other grounds raised by the petitioner. I allow this writ petition and quash the demand made on the petitioner pursuant to the order of assessment, exhibit P-6. In the circumstances of the case there will be no order as to costs.