Restitution of refunded tax money followed rejection on remand, where the interim withdrawal was made on an undertaking to repay.

An interim refund withdrawal made on an undertaking to repay, if the Department succeeded, was treated as recoverable once the refund order was set aside and the refund claim was later rejected on remand. The interim arrangement and undertaking supported restitution because the basis for retaining the amount had ceased. The petitioners were therefore liable to restore the refunded sum with interest, reflecting the operative effect of the interim order and the subsequent rejection of the claim.

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Issues: Whether the petitioners were bound to refund the amount deposited under the interim order, with interest, after the appellate refund order was set aside and the claim was ultimately rejected on remand.

Analysis: The interim arrangement required the petitioners to withdraw the deposited refund amount on an undertaking to repay it if the Department succeeded in the proceedings. Once the refund order was set aside and the Assistant Collector, on remand, dismissed the refund claim, the basis for retaining the amount ceased. The undertaking and the interim order entitled the Department to restitution of the amount with interest.

Conclusion: The petitioners were required to refund Rs. 2,59,814/- with interest at 12% per annum from 17 January 1989 until repayment.

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