Refund interest follows the law in force when liability arises, not the repealed sales tax rate.

Interest on a sales tax refund was payable by reference to the statutory regime in force when the interest liability arose, not the repealed sales tax law under which the original assessment had been made. Applying the doctrine of merger and the effect of the appellate revision, the court treated the corrected assessment as giving legal shape to the refund claim. Because the Gujarat Value Added Tax Act, 2003 had already come into force and the claim to interest arose from August 2006, the higher rate under the Gujarat Sales Tax Act, 1969 did not apply. Interest was therefore payable at 6% per annum under section 38 of the Gujarat Value Added Tax Act, 2003.

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Issues: Whether the petitioner was entitled to interest on the refunded tax amount and, if so, whether interest was payable at 9% under section 54 of the Gujarat Sales Tax Act, 1969 or at 6% under section 38 of the Gujarat Value Added Tax Act, 2003.

Analysis: The refund arose after the appellate authority revised the assessment, but the liability to pay interest had to be determined with reference to the statutory regime in force when interest became payable. The controversy was treated as covered by the prior decision applying the doctrine of merger and holding that an appellate order merely gives legal shape to the corrected assessment. However, the court accepted that the Gujarat Value Added Tax Act, 2003 had come into force with effect from 1 April 2006 and that the petitioner was claiming interest from August 2006. On that basis, the rate under the repealed sales tax law could not govern the refund interest for the relevant period.

Conclusion: The petitioner was entitled to interest on the refund amount, but not at 9% under the Gujarat Sales Tax Act, 1969; interest was payable at 6% per annum under section 38 of the Gujarat Value Added Tax Act, 2003.

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