(2) is incorrect. You can't "refuse someone to do something", except maybe in an interpretation that "to" means "in order to", which in this case is peculiar and strained. For (1), I would prefer to say "refused to ban the bursting of crackers".
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Laboriousthe function of the 'infinitive phrase/clause'The infinitive may be said to be a complement of the verb. It tells which action the subject is refusing to do.
Laborious1) The Chief Justice refused to ban bursting crackers during the night of Diwali. 2) Most of the company's employees refused the CEO to accept the new policies.