2010 (6) TMI 736 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of withholding refund under section 44(1) of the Act.
2. Applicability of section 44(2) of the Act for calculating interest on withheld refund.

Analysis:
1. The petitioner, a registered dealer under the Haryana General Sales Tax Act, sought a refund of excess tax deposited following an order by the Haryana Tax Tribunal. However, the State withheld the refund under section 44 of the Act, citing adverse effects on State interests. The petitioner challenged this withholding through a petition. The court noted that the State did not dispute the fact that refunds for subsequent assessment years were also due, indicating no prejudice to State interests. Consequently, the court quashed the order withholding the refund, stating that it lacked legal basis.

2. The matter was appealed by the State, focusing on the application of section 44(2) of the Act. The court deliberated on the interpretation of section 44(2), which allows for the exclusion of the period of refund withholding for interest calculation purposes. The court emphasized that section 44(2) applies only when the withholding of refund is valid. Since the court had deemed the withholding of the refund in this case as invalid, section 44(2) could not be applied. Therefore, the court concluded that the period during which the refund was withheld cannot be excluded for interest calculation under section 43 of the Act.

In conclusion, the court allowed the petitions, directing the calculation and payment of the amount due to the petitioner within three months from the date of the court order.