Refund interest begins when the appellate refund order reaches the department, despite a later refund-bar objection.

Interest on a refundable tax amount accrues from the date the department receives the first appellate order directing refund, where that order is later affirmed. The refund-bar provision was treated as inapplicable to postpone interest merely because the department later sought to deny refund on the ground that the burden had been passed on to customers. The appellate authority had already found the penalty unjustified and recorded that the excess collection had been returned through credit notes, so the adjustment of the amount against penalty was treated as part of the refund for interest purposes. The department's later refusal did not delay commencement of interest.

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Issues: Whether the assessee was entitled to interest on the refunded amount from the date of the first appellate order directing refund, and whether the department could deny such interest by invoking the bar against refund under the refund provisions.

Analysis: The amount became refundable when the first appellate authority directed return of the excess tax adjusted against penalty, and that order was later affirmed in the departmental challenge. The bar on refund for amounts passed on to others was held to apply only where refund itself is otherwise payable and the facts show that the assessee had not borne the burden. Here, the appellate authority had already found the penalty unjustified and recorded that the excess collection from customers had been returned by credit notes. The adjustment of the refundable amount against penalty was treated as part of refund for the purpose of the interest provision, and the department's later refusal under the refund-bar provision did not postpone the start of interest.

Conclusion: The assessee was entitled to interest on the refundable amount from the date the assessing authority received the first appellate order directing refund, and the writ petition was allowed.

Ratio Decidendi: Where a competent appellate authority has directed refund of excess tax or an adjustment treated as refund, and that direction is affirmed, interest on the refundable amount accrues from the date the refund order is received by the department, notwithstanding a later and unsuccessful attempt to deny refund on a statutory refund-bar ground.

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