(1) If a registered dealer has filed any return as required under this Act and the return shows any amount to be refundable to the dealer on account of sales in course of export out of the territory of India, then the dealer may apply in the manner and form prescribed, to the Commissioner, for grant of provisional refund pending audit and investigation to establish the correctness of the claim and consequent assessment, if any.

(2) Subject to the provisions of sub-section (3); the Commissioner may require the dealer to furnish irrevocable Bank guarantee for an amount equal to the amount of refund. On receipt of such guarantee, the Commissioner shall, subject to the procedure as prescribed, grant the dealer a provisional refund of such amount that may be determined as refundable.

(3) When the dealer is assessed provisionally under sub-section (a) of section 30,

the Commissioner shall adjust the amount of provisional refund against tax due, if any, as a result of assessment. If the process of assessment cannot be or is not completed within a period of three months from the date of filing the application or within one month of the assessment notice whichever is later, the provisional refund shall be granted forthwith:

Provided that if the delay in completing the assessment under this sub-section is 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 delay shall be excluded while computing the period of limitation under this sub-section and such period shall not be reckoned for grant of interest, if any, admissible by or under sub-section (2) of section 33 of this Act.

Provided further that if the lapse on the part of the dealer persists, the Commissioner shall make the provisional assessment absolute and forfeit the bank guarantee furnished to the extent of tax assessed, penalty imposed and interest levied.

(4) If, on assessment, the provisional refund granted under sub-section (2) is found to be in excess, then the excess shall be recovered as if it is tax due from the dealer under this Act. On such excess amount, interest will be charged at the rate of two percent per month, from the date of grant of provisional refund, till the date of assessment.