Compensatory interest on sales tax refund applies even when refund arises from tax set-off entitlement.

Interest under section 23(2) of the Rajasthan Sales Tax Act, 1954 was held payable on a refund arising from set-off of tax because the amount had remained with the department and was refundable to the assessee. The provision was treated as compensatory, reflecting the time value of money and the loss caused by delayed refund. A narrow reading excluding set-off refunds was rejected, as it would permit arbitrary retention of money due to the dealer. The revision was therefore found to lack merit.

---

---

Issues: Whether interest under section 23(2) of the Rajasthan Sales Tax Act, 1954 was payable on an amount refundable to the assessee where the refund arose on account of set-off of tax.

Analysis: Section 23(2) provides for interest at 15% per annum on an amount refundable to a dealer under the Act from the date of deposit of the amount to be refunded. The provision was read as embodying the principle that money has a time value and that delay in refund causes compensatory loss. A narrow construction excluding refunds granted on account of set-off was rejected, since the amount had in fact remained with the department and was found refundable to the assessee. Such an interpretation was also considered necessary to avoid arbitrary retention of money due to the assessee.

Conclusion: Interest under section 23(2) was payable on the refundable amount even though the refund arose from the assessee's entitlement to set-off; the revision was without merit.

---