Interest on refunded sales tax was payable where revenue retained money without justification, including for the pre-1993-94 period.

Interest was directed on sales tax refund money retained by the revenue without justification, because the amount had been paid under protest on stone-crushing activity later treated as non-manufacturing activity. Although the statutory interest provision under section 54(1)(aa) of the Gujarat Sales Tax Act, 1969 applied from 1 April 1993, the pre-1993-94 period was covered by the compensatory principle that an assessee should receive interest when the State retains money unlawfully. Simple interest at 9% per annum was therefore payable for the earlier assessment period, with a higher rate applying if payment was delayed beyond the stipulated time.

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Issues: Whether the petitioner was entitled to interest on the refund amount retained by the revenue for the assessment period prior to 1993-94.

Analysis: The refund arose from tax paid under protest on stone-crushing activity, which was later held not to amount to manufacture. The statutory provision for interest on refund under section 54(1)(aa) of the Gujarat Sales Tax Act, 1969 came into force with effect from 1 April 1993, but the petitioner's claim for the earlier period was examined on the footing that money retained without justification should be compensated. Relying on the principle that an assessee is entitled to compensation by way of interest where revenue has retained its money without justification, simple interest at 9% per annum was directed on the amount retained for the period prior to assessment year 1993-94.

Conclusion: The petitioner was held entitled to simple interest at 9% per annum on the refunded amount for the assessment period prior to 1993-94, with a higher rate becoming applicable if payment was delayed beyond the stipulated time.

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