Interest on delayed tax refund may follow annulment of penalty order when the department retains refundable money beyond the statutory period.

Interest was payable on the delayed refund of a penalty amount that became refundable after the penalty order was annulled in appeal, because the refund provisions of the Punjab General Sales Tax Act, 1948 required payment of interest where the refundable sum was not returned within ninety days of the relevant order. The argument that the original check barrier officer was not the assessing authority did not defeat the claim, since the department retained the money and made the refund only after substantial delay. The Court also noted that the State could not retain money without lawful authority and could be liable to compensate the assessee for wrongful retention, with the statutory rate under section 12(3) treated as a reasonable measure.

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Issues: Whether interest was payable on the delayed refund of penalty amount that became refundable after the penalty order was annulled in appeal.

Analysis: The refund provisions of the Punjab General Sales Tax Act, 1948 were held to require payment of interest where the amount refundable was not returned within ninety days of the relevant order. The Court held that the contention that the original check barrier officer was not the assessing authority did not defeat the claim, because the refundable amount was retained by the department and the actual refund was made only after a substantial delay. The Court further held that, even apart from the statutory provision, the State could not retain money without lawful authority and was liable to compensate the assessee for the period of wrongful retention, with the statutory rate under section 12(3) serving as a reasonable measure.

Conclusion: The assessee was entitled to interest on the delayed refund, and the writ petition was allowed.

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