Mandatory VAT appeal deposit refund cannot be withheld merely because revision proceedings are pending; statutory interest applies.

Refund of tax deposited as a pre-condition for filing an appeal had to be returned within ninety days under Section 33(2) of the Telangana Value Added Tax Act, 2005, and delay attracted interest at 1% per month under Section 39(2). The mandatory wording made the refund obligation binding, and pending revision proceedings did not justify withholding the amount. Refund could be retained only in the limited circumstances under Section 40, and no valid withholding order under Section 40(2) was produced. The assessee was therefore entitled to refund together with statutory interest.

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Issues: Whether refund of tax paid as a pre-condition for filing the appeal could be withheld merely because tax revision proceedings against the Tribunal's order were pending, and whether the assessee was entitled to refund with interest.

Analysis: The statutory scheme under Section 33(2) of the Telangana Value Added Tax Act, 2005 requires refund of the amount paid for maintaining the appeal within ninety days, and Section 39(2) provides for interest at 1% per month on delay beyond that period. The Court held that the use of the word "shall" made the refund obligation mandatory, and that withholding refund was permissible only in the limited situation contemplated by Section 40, not on the ground that revision proceedings were pending. The Court also noted that mere pendency of proceedings before the High Court does not authorise the revenue to keep the refund back, and that no valid order withholding refund under Section 40(2) was produced.

Conclusion: The assessee was entitled to refund with statutory interest, and the respondents could not refuse refund on the basis of pending revision proceedings.

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