Refund withholding under Haryana VAT requires pending proceedings and recorded reasons; mechanical refusal is impermissible.

Section 21 of the Haryana VAT Act, 2003 permits withholding of a refund only where the order giving rise to the refund is itself subject to further proceedings and the taxing authority records reasons showing that release is likely to prejudice recovery. The proviso to Section 21(2) also limits this power by requiring release if no withholding order is received within the stipulated period. A mere file noting is not a valid substitute for a statutory order. An unreasoned, mechanical exercise of the withholding power is therefore impermissible and the refund cannot be withheld.

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Issues: Whether the order withholding refund under Section 21 of the Haryana VAT Act, 2003 was valid when the assessment order giving rise to the refund was not subject matter of further proceedings and the order was unreasoned.

Analysis: Section 20(5) provides for refund of amounts arising from orders of the court, appellate authority or revisional authority, while Section 21 permits withholding of refund only where the order giving rise to the refund is the subject matter of further proceedings and the taxing authority is of the opinion, for recorded reasons, that grant of refund is likely to adversely affect recovery. The proviso to Section 21(2) further limits the power by requiring release of the refund if no order withholding it is received within the stipulated period. The reference for withholding was made when no such further proceedings were pending, and a mere noting on file could not substitute for a statutory order. The impugned order also lacked reasons and reflected a mechanical exercise of power, which was impermissible under the scheme of Section 21.

Conclusion: The withholding order was invalid and unsustainable, and the refund could not be withheld against the assessee.

Ratio Decidendi: The power to withhold refund under Section 21 of the Haryana VAT Act, 2003 can be exercised only when the refund-giving order is under further proceedings and only by a reasoned statutory order after due application of mind; a mechanical or unreasoned withholding is illegal.

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