Refund appropriation against alleged interest demand requires prior determination of liability before any recovery adjustment.

Interest could not be appropriated against a refund unless the interest liability had first been legally determined. The record showed no determination by the lower authorities that the respondent was liable for the interest sought to be recovered, and the recovery power could not be used to adjust an unascertained amount. The appropriation of the refund towards the alleged interest demand was therefore arbitrary and unsupported by the record, and the assessee succeeded on this issue.

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Issues: Whether interest could be appropriated against the refund due in the absence of a prior determination of such interest liability.

Analysis: The record did not show any determination by the lower authorities that the respondent was liable to pay the interest amount sought to be recovered. The statutory power invoked was only for recovery or appropriation of amounts due, and such power could not be exercised to adjust an amount that had not been legally ascertained as payable. In these circumstances, the appropriation of the refund towards the alleged interest demand was treated as arbitrary and unsupported by the record.

Conclusion: The appropriation was impermissible in the absence of a determined liability, and the assessee succeeded on this issue.

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