Interest on delayed tax refund was awarded where the penalty had already been set aside and payment was unreasonably withheld.

Interest may be granted on a belated refund when a penalty has already been set aside and the refund is withheld for an unreasonable period. The writ court can intervene on equitable grounds to compensate for the delay, and a defence of unjust enrichment will not defeat relief where no lawful basis for retaining the sum is shown. Applying that principle, interest was directed on the refunded penalty amount from 1 March 2015 until actual payment, and the authorities were required to release the interest expeditiously.

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Issues: Whether interest was payable on the belated refund of the penalty amount already directed to be refunded by the appellate tribunal, and whether the petitioner was entitled to equitable relief under the writ jurisdiction.

Analysis: The penalty imposed on the petitioner's predecessor had been set aside by the appellate tribunal, and the refunded amount of Rs. 10,00,000 remained with the authorities for an unreasonable period after the appellate order. The delay in giving effect to the refund order warranted interference in writ jurisdiction. The defence based on unjust enrichment did not assist the respondents in the circumstances, as the sum had in fact been refunded only belatedly and no lawful basis for retaining it for so long was shown.

Conclusion: Interest was directed to be paid on Rs. 10,00,000 at 8% per annum from 1 March 2015 until actual payment, in favour of the petitioner.

Final Conclusion: The writ petition succeeded only to the extent of compensation for delayed refund, and the respondents were bound to release the interest amount expeditiously.

Ratio Decidendi: Where a lawful refund is withheld beyond a reasonable time after the underlying penalty has been set aside, the writ court may grant interest on equitable grounds to compensate for the delay.

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