Appellate pre-deposit refund and consequential penalty demand cannot survive once the assessment is annulled and relief is granted.

Where the appellate statute provides for refund of a pre-deposit after the appeal succeeds, the refund arises by operation of law and the authority must return the deposit with statutory interest without a separate application. A demand for penalty and interest cannot survive once the assessment forming its foundation has been annulled, and where no final penalty order has been passed, the notice is unsustainable. The writ petitions were allowed, the impugned demand was set aside, and refund was directed.

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Issues: (i) Whether the prescribed authority was bound to refund the amount of pre-deposit made by the assessee under the appellate provisions after the Tribunal allowed the appeal and set aside the assessment orders; and (ii) whether the notice demanding penalty and interest could survive after the assessments had been nullified and no final penalty order had been passed.

Issue (i): Whether the prescribed authority was bound to refund the amount of pre-deposit made by the assessee under the appellate provisions after the Tribunal allowed the appeal and set aside the assessment orders.

Analysis: The fourth proviso to section 33 of the Andhra Pradesh Value Added Tax Act, 2005 obliged the prescribed authority to refund the amount deposited as a condition for appeal once the appellate order resulted in relief to the assessee. The obligation was treated as statutory and self-executing, not dependent on a separate application. Since the Tribunal had allowed the appeals and the assessee had already deposited the required percentage of disputed tax, the authority was required to compute and issue refund along with the applicable interest within the stipulated period.

Conclusion: The issue was decided in favour of the assessee, and refund of the pre-deposit with interest was held to be mandatory.

Issue (ii): Whether the notice demanding penalty and interest could survive after the assessments had been nullified and no final penalty order had been passed.

Analysis: The demand was based on assessments that had been set aside by the Tribunal. The penalty proceedings had not culminated in any final order imposing penalty, and the interest demand was only consequential to the assessment that no longer survived. In those circumstances, the demand notice reflected a failure to appreciate the legal effect of the Tribunal's order and could not stand.

Conclusion: The issue was decided in favour of the assessee, and the demand notice for penalty and interest was quashed.

Final Conclusion: The writ petitions succeeded, the impugned demand was set aside, and the respondents were directed to refund the amounts deposited in appeal with statutory interest.

Ratio Decidendi: Where the appellate statute provides for refund of the appellate pre-deposit after the appeal succeeds, the refund is mandatory and arises by operation of law, and a demand for penalty or interest cannot survive once the assessment forming its foundation has been annulled.

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