Interest on appellate refunds under sales tax law is compensatory and payable when assessment is modified in appeal.

Interest under Section 54(1)(aa) of the Gujarat Sales Tax Act is payable on a refund arising from an appellate order because the assessment, once modified in appeal, merges into the appellate order and the final assessment is the one made on appeal. A restrictive reading that limits interest only to refunds arising at the original assessment stage would create unequal treatment between assessees and defeat the compensatory purpose of the provision. The provision must therefore be construed to advance its object and avoid discriminatory or unworkable results, with interest payable on the appellate refund.

---

---

Issues: Whether interest under Section 54(1)(aa) of the Gujarat Sales Tax Act is payable on a refund arising from an appellate order.

Analysis: The refund arose because the assessment order was modified in appeal. Once an appellate authority alters the assessment, the original assessment order merges in the appellate order and the final assessment is the one resulting from the appellate process. A restrictive reading confining interest only to refunds arising from the original assessment would create unequal treatment between assessees who obtain refund at the assessment stage and those who obtain refund in appeal. The provision is compensatory in nature and must be construed so as to advance its purpose and avoid discrimination or unworkable results.

Conclusion: Interest is payable on refund granted by the appellate order, and the challenge by the Revenue fails.

---