Lawful withholding of refund is prerequisite for excluding the withholding period from interest computation on sales tax refunds.

Under the Haryana General Sales Tax Act, the period during which a refund is withheld can be excluded from interest computation only if the withholding is lawful under the refund-withholding provision. If the withholding is not shown to be valid and is treated as illegal, the exclusion under the corresponding provision does not apply. The refund period therefore remains part of the interest calculation, and interest is payable on the refund amount for the entire period of wrongful withholding.

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Issues: Whether the period during which refund was withheld could be excluded while calculating interest under section 43 of the Haryana General Sales Tax Act, 1973, in view of section 44(2) of the Act.

Analysis: Section 44(2) operates only where the withholding of refund is valid under section 44(1). The exclusion of the withholding period for interest calculation is therefore conditional upon a lawful order withholding refund. Where the withholding itself is not shown to be for a valid reason and is held to be illegal, section 44(2) has no application. In such a situation, the period for which refund remained withheld cannot be excluded while computing interest under section 43.

Conclusion: The period during which the refund was withheld could not be excluded for the purpose of calculating interest, and the assessee was entitled to interest on the refund amount.

Ratio Decidendi: The exclusion of the withholding period from interest computation under section 44(2) is available only when the withholding of refund is lawful and valid under section 44(1).

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