40. Power to withhold refund in certain cases

Where an order giving rise to a refund is passed and the Commissioner is satisfied that the grant of the refund is likely to be prejudicial to the interest of revenue and action under sub-section (3) or sub-section (6) of Section 49 is required to be initiated or an application to the Tribunal to enhance the tax levied or penalty imposed is required to be made or the said order is the subject matter of any proceeding under Section 55, the Commissioner may withhold the refund till such time as the aforesaid proceedings are finally decided .

Provided that the dealer shall be paid interest under sub-section (5) of Section 39 on the amount of refund ultimately determined to be due as a result of the aforesaid proceedings for the period commencing after the expiry of sixty days from the date of receipt of the order giving rise to the refund.