Refund withholding requires statutory preconditions; invalid withholding triggers interest on delayed refund and costs

Refund under the Haryana General Sales Tax Act could be withheld only where the statutory preconditions were met and the authority's opinion that release would prejudice recovery was supportable on the record. Because the State did not dispute the assessee's turnover and refund position and showed no basis for likely revenue prejudice, the withholding order was unsustainable and was quashed. Once withholding was held invalid, delay in releasing the refund could not be justified by pending proceedings, and interest on the delayed refund followed. The assessee was therefore entitled to refund with interest, including interest on the earlier delayed amount, together with costs.

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Issues: (i) Whether refund could be lawfully withheld under section 44 of the Haryana General Sales Tax Act, 1973 on the ground that proceedings were pending and recovery was likely to be adversely affected. (ii) Whether the assessee was entitled to interest on delayed refund where the refund had not been validly withheld.

Issue (i): Whether refund could be lawfully withheld under section 44 of the Haryana General Sales Tax Act, 1973 on the ground that proceedings were pending and recovery was likely to be adversely affected.

Analysis: Section 44 permits withholding of refund only when an order giving rise to refund is under appeal or further proceedings, or other proceedings under the Act are pending, and the authority forms an opinion that granting refund is likely to adversely affect recovery. On the facts, the State did not controvert the petitioner's turnover and refund position, and the Court found no basis to conclude that release of the refund would prejudice the revenue.

Conclusion: The order granting approval for withholding the refund was unsustainable and was quashed.

Issue (ii): Whether the assessee was entitled to interest on delayed refund where the refund had not been validly withheld.

Analysis: Once the withholding order was held invalid, the delay in making the refund could not be justified by reference to pending proceedings. The Court applied the settled law on refund and interest on delayed refund and treated the matter as covered by earlier binding decisions on the same statutory scheme.

Conclusion: The assessee was held entitled to interest on the delayed refund amount.

Final Conclusion: The refund withholding order was set aside, refund with interest was directed, and the assessee was awarded interest on the earlier delayed refund as well as costs.

Ratio Decidendi: Refund can be withheld under the refund-withholding provision only when the statutory preconditions are satisfied and the authority's opinion that release would prejudice recovery is supportable on the record; once unlawful withholding is found, statutory interest on delayed refund follows.

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