Refund withholding under sales tax law requires pending proceedings and recorded satisfaction; adjustment defeated penalty and interest.

Refund under the Punjab General Sales Tax Act could not be withheld under section 12(6) unless the refund was the subject of pending appeal or other proceedings and the Assessing Authority recorded satisfaction that release would adversely affect recovery. As no pending proceeding concerning the refund was shown and no requisite satisfaction was recorded, withholding was contrary to the statute. The refund was therefore required to be adjusted against the subsequent demand, and the balance tax stood paid by such adjustment. On that basis, no penalty or interest could be levied for non-payment of the balance demand.

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Issues: Whether the refund under the Punjab General Sales Tax Act, 1948 could be withheld under section 12(6) when no appeal or other proceeding concerning the refund was pending and no satisfaction was recorded that the refund was likely to adversely affect recovery, and whether the assessee was consequently liable to penalty or interest for non-payment of the balance demand.

Analysis: Section 12(6) permits withholding of a refund only if the refund is the subject-matter of an appeal or further proceedings, or other proceedings under the Act are pending, and the Assessing Authority forms an opinion that the refund is likely to adversely affect recovery. The record did not show any pending appeal, revision, or other proceeding relating to the refund, and the Assessing Authority did not record the requisite satisfaction. A mere reference to suo motu action by the Commissioner was insufficient without material showing that such proceedings were actually pending. In the absence of fulfilment of both statutory conditions, the withholding was contrary to section 12(6). Since the refund had to be adjusted against the next year's demand, the balance tax stood paid by adjustment and no penalty or interest could follow for non-payment of that balance.

Conclusion: The withholding of the refund was illegal and invalid, the adjustment of the refund against the subsequent demand was allowed, and the levy of penalty or interest for non-payment of the balance demand was not sustainable.

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