Refund interest on appellate assessment modifications must be read compensatorily, not restrictively, under the sales tax refund provision.

Interest on refund under section 54(1)(aa) of the Gujarat Sales Tax Act was treated as payable even where the refund arose from an appellate modification of the assessment. The analysis applied the doctrine of merger to explain that, once appeal is decided, the appellate order forms part of the assessment process and the expression "order of assessment" is not confined to the original order of the assessing authority. The provision was read as beneficial and compensatory, intended to compensate the assessee for the State's use of its money, and it was rejected as discriminatory to deny interest merely because the refund resulted from appeal or revision.

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Issues: Whether interest was payable on refund arising from an appellate order under section 54(1)(aa) of the Gujarat Sales Tax Act, and whether the modified assessment order passed in appeal was covered by the expression "order of assessment" for the purpose of granting such interest.

Analysis: The refund arose because the appellate authority modified the assessment order. The reasoning proceeded on the basis that an order of assessment does not remain confined to the original order of the assessing authority once an appeal is decided, because the appellate order merges with the original order under the doctrine of merger. A restrictive construction of the provision was held to be inconsistent with the compensatory purpose of interest on refund and would create discrimination between assessees who obtain refund at the original stage and those who obtain refund in appeal. The provision was treated as beneficial and intended to compensate for the use of the assessee's money by the State. On that basis, interest was held to be available even where the refund resulted from an appellate or revisional order.

Conclusion: Interest under section 54(1)(aa) is payable on refund arising from an appellate order, and the assessee was entitled to such interest.

Final Conclusion: The petition failed because the Tribunal's view granting interest on the refund was sustained, and the challenge to entitlement under the refund provision was rejected.

Ratio Decidendi: Where an appellate order modifies the assessment, the resulting refund is part of the assessment proceedings for the purpose of statutory interest, and the refund provision must receive a compensatory and non-discriminatory construction.

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