A statutory appellate pre-deposit is refundable with 9% interest once the underlying assessment is set aside.

The petitioner, a tea-manufacturing company registered under the Assam Value Added Tax Act, 2003 (“the Act”), filed returns for the assessment year 2014–15. Pursuant to scrutiny assessment, an assessment order dated 20.03.2020 imposed tax liability of ₹44,88,914 along with interest; the demand notice was issued on 03.07.2021. The petitioner contended that the assessment proceedings were initiated beyond the limitation prescribed under Section 39 for exercising powers under Section 36 of the Act.

To maintain its appeal, the petitioner deposited ₹11,22,229 under Section 79(5) of the Act. By order dated 30.12.2021, the Deputy Commissioner of Taxes (Appeals) held that the assessment order was time-barred and set it aside. Although the petitioner sought refund of the pre-deposit, the refund was not granted. Instead, the Special Commissioner of State Tax, by communication dated 11.01.2023, directed reassessment of the appellate order, resulting in further notices and proceedings against the petitioner.

The petitioner therefore challenged the communication dated 11.01.2023 and all consequential proceedings, and sought refund of the pre-deposit with interest.

Whether the petitioner was entitled to refund of the pre-deposit of ₹11,22,229, with applicable interest, after the assessment order had been set aside in appeal?

Whether the Special Commissioner and other tax authorities could direct reassessment and initiate consequential proceedings against the appellate order without following the statutory remedies under the Act?

The Court applied Section 79(5) of the Assam Value Added Tax Act, 2003, under which payment of the prescribed percentage of the disputed tax is a condition for entertaining an appeal; such payment is a pre-deposit for availing the appellate remedy and is not payment of tax.

Relying on Union of India v. Suvidhe Ltd., (2016) 11 SCC 808, and Commissioner of Customs (Import), Raigad v. Finacord Chemicals (P) Ltd., (2015) 15 SCC 697, the Court held that a pre-deposit must be refunded when the appeal succeeds with consequential relief.

It also relied on Gayatri Distillers and Bottling Industries v. State of Assam, (2025) 140 GSTR 370, holding that pre-deposit under the Act cannot be treated as tax and carries interest under Section 52; the applicable interest was held to be 9% per annum.

Under Sections 80 and 82(1) of the Act, the Department’s remedies against the appellate order were an appeal to the Appellate Tribunal or a properly initiated revisional proceeding by the Commissioner, preceded by satisfaction that the order was erroneous and prejudicial to revenue and by an opportunity of hearing to the dealer.

The Court held that the petitioner’s deposit of ₹11,22,229 was made solely to satisfy the statutory pre-deposit requirement under Section 79(5), and did not constitute payment of the disputed tax. Once the appellate authority set aside the assessment order as time-barred, the petitioner became entitled to consequential refund; continued retention of the amount was therefore illegal and unauthorised.

The Court further found that the Special Commissioner’s communication dated 11.01.2023 did not constitute a valid exercise of revisional jurisdiction under Section 82(1), nor had the Department pursued the statutory appellate remedy under Section 80. In the absence of the required jurisdictional satisfaction and hearing, the direction to reassess the appellate order and the consequential notices were contrary to the Act.

The Court clarified, however, that its judgment would not prevent the respondents from taking any legally permissible action against the appellate order.

The respondents, particularly Respondent Nos. 2 and 3, were directed to refund ₹11,22,229 to the petitioner, together with simple interest at 9% per annum from 30.12.2021, the date of the appellate order.

The communication dated 11.01.2023 and all consequential communications and proceedings dated 20.02.2023, 30.11.2023, 09.01.2024 and 27.02.2024 were quashed.

The refund was directed to be made within three months from service of the certified copy of the judgment on Respondent No. 2, with no order as to costs.