Refund adjustment against an unstayed duty demand remains valid if lawful when made, despite later reversal of the demand.

Refund adjustment against an existing, unstayed central excise duty demand was treated as lawful when the adjustment order was passed, because the demand had then been confirmed and no stay barred recovery. The later setting aside of that demand did not retrospectively invalidate the earlier adjustment. The challenge to the adjustment therefore failed, and the refund set-off against the then-outstanding duty liability remained undisturbed.

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Issues: Whether the refund sanctioned to the appellant could be adjusted against an outstanding central excise duty demand that was in force on the date of adjustment, notwithstanding that the demand was set aside at a later stage.

Analysis: The amount refundable to the appellant had been adjusted towards an existing duty liability when the adjustment order was passed. On that date, the demand had been confirmed and there was no stay operating against its recovery. The subsequent setting aside of the demand did not render the earlier adjustment unlawful retrospectively.

Conclusion: The adjustment was valid when made and the challenge to it failed.

Final Conclusion: The appeal was rejected, leaving the adjustment of the refund towards the then-outstanding duty demand undisturbed.

Ratio Decidendi: An adjustment of refund against an existing and unstayed duty demand is lawful if valid on the date it is made, and a later reversal of the demand does not retrospectively invalidate that adjustment.

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