(1) Subject to other provisions of this Act and Rules, the assessing authority shall refund to a dealer, or a person, as the case may be, within a period of sixty days of the date of receipt of such order giving rise to such refund, the amount of tax, including interest or penalty or both, if any, paid by such dealer in excess of the amount due from him, through refund adjustment voucher or through refund voucher:

Provided that the assessing authority shall first adjust such excess amount towards the recovery of any amount due in respect of which a demand notice under this Act and Rules has been issued, or any amount due for any period covered by a return but not paid and, thereafter, refund only the balance, if any.

(2) Where any refund is due to any dealer according to the return furnished by him for any period, such refund may provisionally be adjusted by him against the tax due or tax payable, as per the return filed under sub-section (1) of section 7 for any subsequent period:

Provided that the amount of tax, including interest or penalty or both, if any, due from, and payable by, the dealer on the date of such adjustment shall first be deducted from the amount of such refund before adjustment.

(3) No claim for refund of any tax, including interest or penalty or both, if any, paid for any tax period or periods under this Act shall be allowed in any case where there is an order for reassessment for such period until such reassessment is completed.

(4) (a) Where any return filed under this Act shows any amount to be refundable to a dealer on account of sale in course of export out of the territory of India or, on account of claim of deductions or exemptions provided under this Act, the dealer may make an application in such form to the assessing authority for refund in such manner and in such form as may be prescribed.

Explanation. – For the purpose of this sub-section, the expression "export out of the territory of India" shall have the meaning assigned to it under the provisions of sub-section (1) of section 5 of the Central Sales Tax Act, 1956(74 of 1956).:

Provided that the burden of proving that any scheduled goods were sold in the course of export out of the territory of India shall be on the registered dealer.

(b) As soon as may be, on receipt of the application for such refund,the assessing authority shall direct a tax audit under section 9C for the tax period pertaining to such refund as covered under the return referred to in clause (a) which shall be completed within a period of one month from the date of issue of such direction, to establish the correctness of such claim:

Provided that if there is any delay in completing the audit under this sub-section due to non-cooperation of the dealer or non-production of evidence as may be required to be furnished in support of the claim of refund or any other lapse on the part of the dealer, the period of such delay shall be excluded while computing the period of limitation and such period shall not be reckoned for grant of interest, if any, admissible under sub-section (5):

Provided further that if such lapse on the part of the dealer persists without any valid reason, the assessing authority may reject the application for such refund after giving the dealer an opportunity of being heard.

(c) Where, on assessment based on tax audit under clause (b) the amount of refund claimed is found to be inadmissible or more than what is admissible then, the claim of refund of excess amount shall be disallowed and if, in consequence thereof, any amount is found due from the dealer, he shall be liable to pay interest at the rate of two per centum per month on that amount from the date of filing of the return giving rise to the refund till the date of assessment.

(5) A registered dealer entitled to refund in pursuance of any order under this Act including an order of assessment under section 9 A or section 9 C and section 10 or in pursuance of any order of a Court shall, in addition to the refund, be paid in the prescribed manner simple interest at the rate of eight per centum per annum for period commencing immediately after expiry of sixty days of receipt of the order till the date on which refund is granted:

Provided that interest as applicable under this sub-section shall be admissible after expiry of the period of ninety days from the date of receipt of the application for grant of refund under sub-section (4) till the date of sanction.

(6) (a) Where any order giving rise to a refund is the subject matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the Commissioner is of the opinion that, the grant of such refund is likely to adversely affect the revenue and that it may not be possible to recover the amount later, the Commissioner may withhold the refund till the final order is passed in such appeal or proceeding.

(b) Where a refund is withheld under clause (a) the dealer shall be entitled to interest as provided under sub-section (5), if he becomes entitled to the refund as a result of the appeal or further proceeding or, as the case may be, any other proceeding under this Act.