Reasonable-time recovery of old tax dues requires principal-first appropriation, no interest on interest, and notice before further recovery.

Recovery of stale trade tax dues, even without a prescribed limitation period, must still be pursued within a reasonable time. A delay of about 19 years was treated as unreasonable on the facts, especially where the assessee had not been informed of the outstanding balance or accumulated interest before money was withdrawn from post office accounts. Amounts recovered had to be appropriated first towards principal tax liability and only then towards interest, and interest could not be charged on interest. Further interest on unpaid principal was restricted after 12 years from the recovery certificate, treated as the outer reasonable period in the case. The court directed a fresh account statement, recomputation, refund of excess with interest, and further recovery only after notice and hearing.

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Issues: Whether recovery of old trade tax dues could be enforced after an lapse of time without prior intimation or notice, and whether the amount recovered and the interest charged were required to be adjusted only against the principal liability first.

Analysis: The demand was not barred by any prescribed limitation, but the power to recover stale dues had to be exercised within a reasonable period. A delay of about 19 years was held to be unreasonable in the facts of the case, particularly when the authorities had not informed the assessee of the subsisting balance or the accumulated interest before withdrawing money from the post office accounts. The Court further held that amounts realized had to be adjusted first towards principal tax dues and only thereafter towards interest, and that interest could not be levied on interest already accrued. The Court also held that no further interest should be charged on unpaid principal after 12 years from the recovery certificate, which was treated as the reasonable outer period in the case.

Conclusion: The recovery was not quashed and the refund prayer was not granted, but the authorities were directed to furnish a complete statement of account, recompute the dues by giving credit first to principal, exclude interest on interest, restrict further interest after 12 years, refund any excess amount with interest, and recover any deficiency only after notice and hearing.

Ratio Decidendi: In the absence of a prescribed limitation, recovery of public dues must still be pursued within a reasonable time, and recovered amounts must be appropriated first towards principal and not towards interest unless the law or contract provides otherwise.

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