Statutory interest on refunded pre-deposit runs from annulment of demand, not from the later remand assessment order.

Where a tax demand is set aside in appeal and a pre-deposit remains retained by the department, statutory interest on refund runs from the date the demand is annulled, not from the later remand assessment order. The Punjab and Haryana High Court applied the settled principle that once the original demand was cancelled and the matter remitted for fresh consideration, the assessee's right to interest arose immediately on wrongful retention of the deposited amount. The assessee was therefore entitled to interest under section 12 of the Punjab General Sales Tax Act, 1948 from 21 November 2001 until refund.

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Issues: Whether the assessee was entitled to statutory interest on the refunded pre-deposit from the date on which the appellate authority set aside the demand and remitted the matter back, rather than from the date of the remand assessment order.

Analysis: The amount had been deposited as a condition for entertainment of the appeal and remained with the department after the appellate authority accepted the appeal, set aside the demand, and remanded the case. The Court followed the settled principle that once the original demand is annulled and the matter is sent back for fresh consideration, the assessee is entitled to interest on the retained amount for the period of wrongful retention. The later remand assessment order could not postpone the commencement of interest, because the liability to refund with statutory interest arose when the demand was first set aside.

Conclusion: The assessee was held entitled to interest under section 12 of the Punjab General Sales Tax Act, 1948 from 21 November 2001 until the date of refund.

Final Conclusion: The writ petition succeeded, and the respondents were directed to pay statutory interest on the refunded amount for the period of delayed retention.

Ratio Decidendi: Where a tax demand is set aside in appeal and the deposited amount is retained thereafter, statutory interest on refund runs from the date the demand is annulled, not from the date of the subsequent remand assessment.

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