VAT refund withholding requires reasoned revenue-risk grounds; pending revision alone cannot justify denial under the statutory scheme.

Under the Andhra Pradesh VAT Act, the statutory right to refund of excess tax under sections 38 and 39 cannot be withheld under section 40(2) merely because appeal or revisional proceedings are pending. Withholding is permissible only where the authority records a reasoned opinion, on relevant material, that granting refund is likely to adversely affect the Revenue; a bare reference to pending proceedings is insufficient. The discretion is therefore controlled and must comply with the statutory scheme, including the prescribed prior approval requirement. Administrative advice cannot override the authority vested by the Act to decide refund and withholding.

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Issues: Whether the authority could withhold refund of VAT under section 40(2) of the Andhra Pradesh Value Added Tax Act, 2005 merely because an appeal or further proceeding was pending, and whether such withholding required relevant reasons and prior approval of the Deputy Commissioner.

Analysis: Sections 38 and 39 of the Andhra Pradesh Value Added Tax Act, 2005 confer a statutory right on a dealer to claim refund of excess tax, while section 40(2) authorises withholding only when the authority forms an opinion, on relevant grounds, that grant of refund is likely to adversely affect the Revenue. Mere pendency of appeal or revision is not enough to deny refund, because the statute does not create an absolute bar on refund in such situations. The power is discretionary, not unbridled, and must be exercised on germane reasons with a proper factual basis. The earlier decisions relied upon had already held that withholding refund cannot rest only on the existence of pending proceedings and that prior approval by the Deputy Commissioner is a statutory requirement. The Court further held that the advice of a higher administrative authority cannot override the statutory scheme when the prescribed authority is the one empowered to decide refund and withholding.

Conclusion: The refund could not be withheld on the sole ground of pending tax revision proceedings, and the impugned endorsement was unsustainable. The writ petition was allowed and the respondents were directed to consider refunding the amount.

Ratio Decidendi: A statutory power to withhold refund of tax is confined to cases where the authority records a reasoned opinion, based on relevant material, that refund is likely to adversely affect the Revenue, and it cannot be exercised merely because appellate or revisional proceedings are pending.

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