Tax refund cannot be withheld after appellate relief; statutory interest follows once the refund becomes due.

Where an appellate order sets aside a tax demand, the excess amount collected under the assessment becomes refundable, and the revenue cannot withhold that refund by invoking section 44 or by relying on pending rectification proceedings. The text further states that section 42(7) and section 43 support prompt refund of any excess tax paid when the demand is reduced, so the entitlement to refund crystallises once the appellate relief is granted. It also notes that statutory interest follows from the date the refund becomes due, so the refund obligation extends to interest on the retained amount.

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Issues: (i) whether the tax authorities were bound to refund the tax collected pursuant to assessments after the assessee's appeals were allowed, and whether such refund could be stayed under section 44; (ii) whether the assessee was entitled to statutory interest on the refunded amount.

Issue (i): Whether the tax authorities were bound to refund the tax collected pursuant to assessments after the assessee's appeals were allowed, and whether such refund could be stayed under section 44.

Analysis: On the appeals being allowed, the additional demand raised against the assessee stood set aside, and the authorities became duty-bound to refund the amount recovered under the assessment orders. Section 42(7) of the Haryana General Sales Tax Act, 1973 shows that even where a reference is pending, recovery of the tax due in accordance with the Tribunal's order is not to be stayed, and if the amount is reduced the excess tax paid is to be refunded under section 43. The same principle was applied to refund cases: if recovery cannot be stayed pending reference, a refund ordered by the Tribunal likewise cannot be withheld by invoking section 44. The pendency of rectification proceedings did not alter the entitlement already crystallised by the appellate orders.

Conclusion: The assessee was entitled to immediate refund of the tax, and the refund could not be stayed under section 44.

Issue (ii): Whether the assessee was entitled to statutory interest on the refunded amount.

Analysis: Once the refund became due on the setting aside of the demand, the amount retained by the department carried statutory interest. The relief of refund was therefore not confined to the principal sum, but extended to interest at the rates applied by the Court from the date the refund became due.

Conclusion: The assessee was entitled to statutory interest on the refunded amount.

Final Conclusion: The writ petition succeeded, the withholding of refund was disapproved, and the assessee obtained refund of the tax amount with interest and costs.

Ratio Decidendi: Where an appellate order setting aside a tax demand renders the excess collection refundable, the revenue cannot withhold the refund by relying on pending rectification or similar proceedings, and statutory interest follows from the date the refund becomes due.

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