Yes, refund can be withheld in the following circumstances:
If the registered dealer has not submitted return(s), till he files the reurn(s);
If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; [The proper officer can also deduct unpaid taxes if any of the dealer from the refundable amount].
Commissioner/Board can withhold refund, if, the Order of Refund is under appeal and he is of the opinion that grant of such refund will adversely affect revenue - (Sec.38(9) of MGL).