Interest on encashed bank guarantee is not automatic when the amount is later refunded without a specific entitlement basis.

Interest on a refunded amount was treated as academic once the refund was made in accordance with the statutory requirement. The claim for interest on an encashed bank guarantee also failed because the earlier decision in Jindal Jewellers was confined to cases where refund was not made within the time fixed by the court. The HC held that this precedent did not create a general right to interest on encashed guarantees from the date of encashment merely because the amount was later refunded, so no further relief survived.

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Issues: Whether the petitioner was entitled to interest on the refunded amount and on the bank guarantee encashed in connection with the proceedings under the Punjab General Sales Tax Act, 1948.

Analysis: The claim for interest on refund was treated as having lost significance once the refund had been made in accordance with the statutory requirement. As regards the encashed bank guarantee, the earlier decision in Jindal Jewellers was distinguished because interest there was directed only where the refund was not made within the time fixed by the court. The Court held that that decision did not lay down a general rule entitling interest on the encashed guarantee from the date of encashment where the amount had already been refunded.

Conclusion: The petitioner was not entitled to the claimed interest on the encashed bank guarantee, and no further relief survived.

Ratio Decidendi: Interest on an encashed bank guarantee is not automatically payable merely because the encashed amount was later refunded; such interest depends on the specific legal or judicial basis creating that entitlement.

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