IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P. No.6555 of 2007 Date of decision: 28.6.2010 M/s Sandhu Overseas. -----Petitioner. Vs. State of Haryana and another. -----Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Avneesh Jhingan, Advocate for the petitioner. Ms. Ritu Bahri, Sr. DAG, Haryana. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of C.W.P. No.6555 of 2007 and C.W.P. No.11149 of 2007. The matter has been placed before us in the light of order of the Hon’ble Supreme Court dated 18.9.2009, inter-alia, to the following effect:- “In our view, the High Court was required to analyse Section 44(2) in the context of the facts of these cases. This has not been done. Hence, we set aside the impugned judgment and remit the cases to the High Court for de novo consideration in accordance with law.” CWP No.6555 of 2010 2. The petitioner is a registered dealer under the provisions of the Haryana General Sales Tax Act, 1973 (for short, “the Act”). As a result of order dated 21.10.2003, passed by the Haryana Tax Tribunal, relating to the assessment year 1999- 2000, the petitioner became entitled to refund of excess tax deposited by it. The petitioner sought the said refund and on not being successful, filed this petition. During the pendency of the petition, order dated 7.6.2007 was passed under Section 44 of the Act, withholding the amount of refund on the ground that the State will be adversely affected if refund was made. The said order was challenged by the petitioner by filing C.W.P. No.11149 of 2007. Contention raised on behalf of the petitioner was that the finding that State will be adversely affected by making refund, was without any factual or legal basis, as even for subsequent assessment years i.e. assessment years 2004-05, 2005-06 and 2006-07, refund of about Rs.94 lacs was due, which was not disputed by the State. The factual aspect, as mentioned above, having not been disputed, this Court in order dated 28.9.2007 held:- “The aforesaid factual position has not been controverted by the State either in the reply filed or during the course of arguments. In the light of the aforesaid facts, it cannot be concluded that refunding of the amount of Rs.5,38,780/- for the assessment year 1999-2000 in any manner shall prejudice the State interest. The order passed on 7.6.2007 granting approval for withholding of refund of Rs.5,38,780/-, 2 CWP No.6555 of 2010 thus, cannot legally be sustained. Accordingly, the order dated 7.6.2007 is quashed. Once order of withholding of refund of Rs.5,38,780/- for the assessment year 1999-2000 is held to be invalid, the next question which requires determination is whether the petitioner is entitled for interest on the amount of refund.” 3. On appeal being filed by the State, the matter has been remanded to consider the effect of Section 44(2) of the Act, as mentioned above. However, the Hon’ble Supreme Court directed the department to refund the amount, which according to the petitioner has since been made. 4. We have heard learned counsel for the parties on the question of applicability of Section 44(2) of the Act. 5. According to learned counsel for the petitioner, Section 44(2) can apply only when a valid order is passed under Section 44(1). This submission could not be disputed by learned counsel for the State. 6. Section 44 of the Act is as under:- “44. Power to withhold refund.- (1) Where an order giving rise to a refund is the subject matter of an appeal or further or where any other proceedings under this Act are pending, and the assessing authority or a person appointed to assist the Commissioner under sub-section (1) of section 3, as the case may be, is of the opinion that the grant of the refund is likely to be adversely affect the recovery, he may withhold the refund and refer the case to the 3 CWP No.6555 of 2010 Commissioner for order. The orders passed by the Commissioner shall be final. (2) The period during which the refund remains so withheld shall be excluded for the purpose of calculation of interest under section 43.” 7. It is clear from bare perusal of the above provision that Section 44(2) providing for exclusion of period during which refund was withheld for calculation of interest applies only if withholding of refund was valid. Once withholding of refund is held to be illegal, Section 44(2) of the Act cannot be held to be applicable. In the present case, withholding of refund is not shown to be for a valid reason. Once it is so, Section 44(2) of the Act had no application. 8. We, accordingly, hold that Section 44(2) of the Act will not apply in the present case. The period during which refund was withheld, cannot be excluded for calculation of interest under Section 43 of the Act. The petitions are allowed accordingly. 9. In view of above, the amount due may, accordingly, be calculated and paid to the petitioner within a period of three months from the date of receipt of a copy of this order. (ADARSH KUMAR GOEL) JUDGE June 28, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4