Reasoned satisfaction for withholding refund is mandatory before pre-deposit can be retained under sales tax law.

Refund of a pre-deposit under Section 12(6) of the Punjab General Sales Tax Act, 1948 could be withheld only if pending proceedings existed and the Assessing Authority recorded a reasoned satisfaction, on material, that release of the refund was likely to adversely affect recovery. On the stated facts, the order contained no material showing prejudice to recovery and no real application of mind to the statutory precondition. The withholding order was therefore invalid, and the petitioner was entitled to refund of the deposited amount with statutory interest.

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Issues: Whether the order withholding refund of the pre-deposit under Section 12(6) of the Punjab General Sales Tax Act, 1948 was valid and whether the petitioner was entitled to refund with statutory interest.

Analysis: The power to withhold refund under Section 12(6) could be exercised only where pending proceedings existed and the Assessing Authority formed an opinion that refund was likely to adversely affect recovery. The impugned order did not disclose any material showing how refund would prejudice recovery and contained no real application of mind. In the absence of recorded satisfaction on the statutory precondition, the order could not be sustained.

Conclusion: The withholding order was invalid and the petitioner was entitled to refund of the deposited amount with statutory interest.

Ratio Decidendi: A refund cannot be withheld under Section 12(6) of the Punjab General Sales Tax Act, 1948 unless the authority records a reasoned satisfaction, based on material, that release of the refund is likely to adversely affect recovery.

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