Delayed trade tax refund attracts statutory interest, and unlawful withholding of interest can justify further equitable compensation and costs.
Under the U.P. Trade Tax refund scheme, delayed payment of refundable tax beyond the statutory three-month period triggered simple interest at 18% per annum, and administrative objections such as verification or countersignature could not defer that liability; the refund was treated as pending until the voucher was made ready and communicated. The court also held that where statutory interest itself was unlawfully withheld, equitable jurisdiction under Article 226 could justify compensation by awarding interest on the withheld interest at the current bank rate, together with exemplary costs for arbitrary revenue conduct. The principal refund amounts had already been paid, so no further substantive refund direction was required.
Issues: (i) Whether the petitioners were entitled to interest under the refund provisions of the U.P. Trade Tax law when the refundable amounts were not refunded within the prescribed period; (ii) Whether the petitioners were entitled to interest on the interest amount unlawfully withheld and to exemplary costs.
Issue (i): Whether the petitioners were entitled to interest under the refund provisions of the U.P. Trade Tax law when the refundable amounts were not refunded within the prescribed period.
Analysis: The refund scheme under Section 29 of the U.P. Trade Tax Act required the Assessing Authority to refund excess tax after adjustment of outstanding dues, and where the refund was not made within three months from the date of the refund order or receipt of the appellate order, simple interest at 18% per annum became payable. The Court treated the date of intimation about preparation of the refund voucher as relevant for determining the date of refund. It rejected the administrative objections based on verification, countersignature, or demand for audited accounts as irrelevant to the statutory duty to refund. On the facts, the refund orders had remained unpaid beyond the statutory period, and the petitioners had been informed of readiness of the refund only much later.
Conclusion: The petitioners were entitled to interest at 18% per annum on the delayed refund amounts.
Issue (ii): Whether the petitioners were entitled to interest on the interest amount unlawfully withheld and to exemplary costs.
Analysis: Although the statute did not expressly provide for interest on interest, the Court invoked its equitable jurisdiction under Article 226 of the Constitution of India and held that where the Revenue had unlawfully withheld the statutory interest itself, it was liable to compensate the petitioners by paying interest on the withheld interest amount at the current bank rate. The Court also found the conduct of the authorities arbitrary and unjustified, warranting exemplary costs.
Conclusion: The respondents were directed to pay interest on the withheld interest amount at 10% per annum and to pay exemplary costs to each petitioner.
Final Conclusion: The writ petition succeeded only to the extent of monetary reliefs for delayed refund, additional equitable interest on the withheld interest, and costs, while the principal refund amounts having already been made did not require further substantive refund directions.
Ratio Decidendi: Where a refund order under the trade tax law is not implemented within the statutory three-month period, interest becomes automatically payable from the relevant date of the refund order or its receipt, and administrative verification requirements cannot postpone that statutory liability; in appropriate cases, equitable jurisdiction may also be used to award interest on unlawfully withheld interest and costs.
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