Refund of penalty deposit and interest follows when the penalty order is set aside in appeal.

Once a penalty order under the Punjab General Sales Tax Act was set aside in appeal, the assessee acquired an enforceable right to refund of the amount deposited under that order from the next day. The retaining authority could not defeat that accrued right by withholding the money or by relying on a later order confirming penalty, because the original penalty order had ceased to exist after the appellate decision and no retrospective penalty could be imposed. Interest was payable on the refunded amount under section 12 from the date the refund became due until actual payment.

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Issues: Whether the amount deposited pursuant to the penalty order under the Punjab General Sales Tax Act, 1948 had to be refunded with interest after the appellate authority accepted the appeal.

Analysis: The appellate order dated 26 November 1997 set aside the original penalty order, with the result that the petitioner became entitled to refund of the deposited amount from the next day. The respondents retained the money despite repeated requests and the denial of receipt of the refund request was not categorical. A later order confirming penalty could not defeat the accrued right to refund, since the earlier penalty order had ceased to exist after the appellate decision and no retrospective penalty could be imposed under the statute. Interest was held payable under section 12 of the Act from the date the refund became due until actual payment.

Conclusion: The petitioner was entitled to refund of Rs. 50,000 with admissible interest from 27 November 1997 until payment.

Ratio Decidendi: Once a penalty order is set aside in appeal, the assessee acquires an enforceable right to refund of the amount deposited under that order, and the retaining authority cannot defeat that right by a subsequent order with retrospective effect.

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