Adjustable security deposit for declaration forms attracts statutory interest on delayed refund of excess amount.

A deposit made to obtain declaration form XXXI under a departmental circular was treated as adjustable security, not as compounding money. Because the amount was to be adjusted against tax liability at final assessment, and the excess remained with the department beyond the lawful period before refund, the statutory consequence of delayed refund applied. The department could not avoid liability for interest by recharacterising the deposit. Interest on the delayed refund of the excess amount was therefore payable under section 29(2) of the U.P. Trade Tax Act, 1948.

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Issues: Whether the amount deposited for obtaining declaration form XXXI under the departmental circular was a security deposit and, if so, whether the assessee was entitled to interest on delayed refund of the excess amount under section 29(2) of the U.P. Trade Tax Act, 1948.

Analysis: The amount was deposited only for obtaining declaration form XXXI in terms of the circular issued under section 8C(3A) of the Act. It was not a payment towards compounding money. The amount was required to be adjusted against the tax liability at the stage of final assessment, and that adjustment had in fact been made. Once the excess amount remained with the department beyond the lawful period and was subsequently refunded, the department could not deny interest by characterising the deposit as compounding money. The statutory consequence of delayed refund attracted section 29(2) of the Act.

Conclusion: The assessee was entitled to interest on the delayed refund of the excess amount, and the department was required to calculate and pay the same under section 29(2) of the U.P. Trade Tax Act, 1948.

Ratio Decidendi: A deposit made for obtaining import declaration forms, when treated as adjustable security and not as compounding money, carries statutory interest on delayed refund of the excess amount.

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