Refund withholding power lies only with the designated authority; unlawful retention must end with statutory interest.

Section 39 of the Gujarat Value Added Tax Act, 2003 vests power to withhold a refund in the Commissioner, and only after forming an opinion that the refund is likely to prejudice revenue and giving the dealer a hearing. A Sales Tax Officer cannot assume that power in the absence of a Commissioner's order, so the withholding order was without authority. Once that order was unsustainable, the dealer became entitled to refund of the pre-deposit with statutory interest, and continued retention of the amount was not justified.

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Issues: (i) Whether the Sales Tax Officer had authority to withhold the refund under Section 39 of the Gujarat Value Added Tax Act, 2003; (ii) Whether the petitioner was entitled to refund of the pre-deposit with statutory interest.

Issue (i): Whether the Sales Tax Officer had authority to withhold the refund under Section 39 of the Gujarat Value Added Tax Act, 2003.

Analysis: Section 39 vests the power to withhold refund in the Commissioner, and that power is exercisable only on the Commissioner forming an opinion that grant of refund is likely to adversely affect the revenue, after giving the dealer an opportunity of hearing. No order of the Commissioner existed in the present case, and the Sales Tax Officer could not assume that power on his own. In the absence of the statutory precondition and competent authority's decision, the withholding order was without authority.

Conclusion: The Sales Tax Officer had no authority to withhold the refund, and the impugned order could not be sustained.

Issue (ii): Whether the petitioner was entitled to refund of the pre-deposit with statutory interest.

Analysis: Once the withholding order was found unsustainable, the petitioner's entitlement to refund followed. The Tribunal had already decided in the petitioner's favour, the High Court had dismissed the State's tax appeals, and no effective exercise of power by the Commissioner justified continued retention of the amount. The statutory scheme also contemplates interest where refund becomes due.

Conclusion: The petitioner was entitled to refund of the amount of Rs. 15 lakhs along with statutory interest.

Final Conclusion: The petition succeeded, the withholding order was set aside, and the respondents were directed to release the refunded amount with interest within the stipulated time.

Ratio Decidendi: The power to withhold a refund must be exercised only by the authority designated by statute and in the manner prescribed by the statute; an order passed by an without such authority is invalid, and the refund with applicable interest must follow once the withholding is unsustainable.

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