Interest on refund under Section 54(1)(aa) cannot be curtailed by a proviso tied to a different refund mechanism.

Interest on refund arising under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969 is a distinct substantive entitlement, and the third proviso to Section 54, which is framed for refunds under clauses (a) and (b), cannot be extended to restrict that entitlement. Applying the settled rule that a proviso must remain confined to the subject matter of the enacting clause, the period during which appeals were pending could not be excluded by relying on that proviso. The interest computation excluding that litigation period was therefore legally untenable, and the correct interest position had to be determined afresh.

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Issues: Whether the third proviso to Section 54 of the Gujarat Sales Tax Act, 1969 applies to interest payable under Section 54(1)(aa) on refund arising from an assessment order, and whether the order computing interest by excluding the period of pending appeals was sustainable.

Analysis: Section 54(1)(aa) grants interest on refund arising by virtue of an assessment order, while the third proviso is framed in relation to the refund mechanism under clauses (a) and (b) of Section 54(1). Applying the settled rule that a proviso must be confined to the subject-matter of the enacting clause, the proviso cannot be extended to alter the operation of Section 54(1)(aa). The proviso is an exception and cannot be read as enlarging or modifying a distinct substantive entitlement under clause (aa). The exclusion of the litigation period on the basis of that proviso was therefore legally untenable.

Conclusion: The third proviso was held inapplicable to Section 54(1)(aa), and the order computing interest by excluding that period was quashed. The matter was remitted for fresh determination of interest in accordance with the correct legal position.

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