Delayed refund attracts interest and must be issued through an encashable instrument, not an ineffective payment order.

Interest became payable on a delayed refund where an earlier refund direction was not implemented within the six-week period fixed by the Tribunal, and the applicant was entitled to interest for the delay from 31 March 1990 to 11 February 1991 at the rate under section 1013 of the Bengal Finance (Sales Tax) Act, 1941. The refund was also required to be made by a bank draft on a nationalised bank because the refund payment orders had either been lost or were not encashable. The Tribunal further indicated that refund instruments should be issued in an encashable form consistent with banking practice.

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Issues: (i) whether the applicant was entitled to interest on the refundable amount for the period of delay in carrying out the refund direction; and (ii) whether the refund should be issued by bank draft and not by a refund payment order that could not be encashed.

Issue (i): whether the applicant was entitled to interest on the refundable amount for the period of delay in carrying out the refund direction.

Analysis: The refund direction made earlier was not implemented within the stipulated period of six weeks. The delay in issuing the refund payment order continued from 31 March 1990 to 11 February 1991. For that period, the applicant was held entitled to interest on the refundable amount at the rate provided in section 1013 of the Bengal Finance (Sales Tax) Act, 1941.

Conclusion: The issue is answered in favour of the applicant and interest was directed for the specified delayed period.

Issue (ii): whether the refund should be issued by bank draft and not by a refund payment order that could not be encashed.

Analysis: The earlier refund payment orders had either been lost or could not be encashed because the second instrument was not a MICR instrument. In these circumstances, the Tribunal directed the Commissioner of Commercial Taxes to issue a bank draft on a nationalised bank in Calcutta for the refundable amount together with the interest awarded for the delayed period, and also observed that refund instruments should hereafter be issued in an encashable form consistent with banking practice.

Conclusion: The issue is answered in favour of the applicant and a bank draft was directed to be issued in place of the ineffective refund payment order.

Final Conclusion: The application succeeded only to the extent of interest for the identified delay and consequential issuance of a bank draft, with no interest granted for any later period.

Ratio Decidendi: Where a refund direction is not implemented within the time fixed by the Tribunal, interest becomes payable for the period of delay, and the refund must be made through an instrument capable of effective encashment.

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