The court emphasized that the power to withhold refund under Section 12(6) could only be exercised in specific circumstances where the refund was likely to adversely affect the recovery, and the order withholding refund must provide a basis for how the refund would have such an adverse effect.

M.M.Kumar, J.

1. The prayer made in this petition filed under Article 226 of the Constitution is for issuance of direction to the respondents to release the payment of Rs. 5,50,000 deposited by the petitioner at the time of filing appeal as a condition precedent before the Deputy Excise and Taxation Commissioner (Appeals), Punjab.

2. Brief facts of the case are that the petitioner-firm is engaged in the manufacture of yam. While framing assessment for the year 1992-93, the Assessing Authority created additional demand of Rs. 33,52,234 while rejecting R.D. sales made to two firms, namely, Shiv Shakti Yarn and Indian Woll Agency, vide order dated March 31, 2000.

3. As a pre-condition for entertainment of appeal against the order creating additional demand, the petitioner deposited a sum of Rs. 5,50,000 on September 6, 2005. Ultimately, the order of assessment was set aside by the VAT Tribunal and the matter was remitted back to the Assessing Authority to pass fresh order in accordance with law, vide order dated July 11, 2006. After the remand by the VAT Tribunal, the matter has not been decided by the Assessing Authority in spite of requests made by the petitioner. Thereafter the petitioner filed application dated July 26, 2005, for refund of the amount deposited on September 6, 2005. When no action was taken on the application of the petitioner either for decision of the remand case or for refund of the amount deposited, the petitioner approached this court by filing the present petition on November 29, 2006. After notice of the petition was served respondent No. 1 passed an order on December 6, 2006 (R1) and rejected the claim of the petitioner by observing as under:

This order shall withhold a refund of Rs. 5,50,000 under Section 12(6) of the Punjab General Sales Tax Act, 1948 (hereinafter called, the Act) in the case of M/s. Ratti Woollen Mills, Textile Colony, Indst. Area-A, Ludhiana, for the year 1992-93.

The assessment of M/s. Ratti Woollen Mills, Ludhiana, for the year 1992-93 was made by the Assessing Authority vide order dated March 31, 2000 creating an additional demand of Rs. 33,52,234. The dealer went in appeal against the order of the Assessing Authority and after prolonged litigation, deposited Rs. 5,50,000 under the order of the honourable Punjab and Haryana High Court as prior payment for entertainment of appeal by the Deputy Excise and Taxation Commissioner (Appeals). On further appeal, the case was remanded by VAT Tribunal, Punjab, vide order dated July 11, 2006. Filing of rectification application is already under process in this case. The dealer has made application seeking refund of Rs. 5,50,000 and Assistant Excise and Taxation Commissioner, Ludhiana-III, has sought withholding of refund. The matter has been considered in the light of the provisions under Section 12(6) of the Act ibid which read as under: Where an order allowing refund is the subject-matter of an appeal or further proceedings or where any other proceedings under this Act are pending, and the Assessing Authority is of the opinion that the refund is likely to adversely affect the recovery, the Assessing Authority may withhold the refund and refer the case to the Commissioner whose orders shall be final.

I am of the view that the case is covered under Section 12(6) of the Act, and allowing of refund will adversely affect the chances of recovery of the amount. Accordingly, I hereby withhold refund of Rs. 5,50,000 for the year 1992-93 of the abovesaid dealer under Section 12(6) of the Act.

4. Mr. Y.P. Singla, learned Counsel for the petitioner, has argued that once the appeal filed by the petitioner against the order of assessment has been accepted by quashing that order then even if the case has been remanded back, the petitioner becomes entitled to refund of the amount which was deposited as a pre-condition for entertainment of appeal. The argument is that in the eyes of law no demand of Revenue would be considered pending on that dat