Pending appeal and adequate security can restrain coercive recovery, but consented bank guarantee encashment was not refundable.

Where an appeal remains pending, recovery of the disputed demand may be protected if the assessee furnishes adequate security in the manner prescribed, and coercive recovery can be restrained meanwhile. However, money already recovered by encashment of a bank guarantee, especially where the assessee consented to encashment and no stay was in force, is not ordinarily refundable. The appellate remedy on merits remains open, and any entitlement to the recovered amount depends on the outcome of that appeal.

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Issues: (i) Whether the amount recovered by encashing the bank guarantee was liable to be refunded during the pendency of the appeal before the Tribunal. (ii) Whether recovery of the balance penalty amount could be protected during the pendency of the appeal, subject to furnishing adequate security.

Issue (i): Whether the amount recovered by encashing the bank guarantee was liable to be refunded during the pendency of the appeal before the Tribunal.

Analysis: The petitioner had consented to encashment of the bank guarantee after the first appeal had failed, and the recovery was effected in the absence of any stay. The Court found that the encashment had taken place in the peculiar facts to safeguard the revenue and that the subsequent challenge to refund was not persuasive. The Court also observed that the appellate remedy remained open on merits and that any entitlement to the amount would depend on the outcome of that appeal.

Conclusion: Refund of the amount encashed from the bank guarantee was declined.

Issue (ii): Whether recovery of the balance penalty amount could be protected during the pendency of the appeal, subject to furnishing adequate security.

Analysis: The appeal was pending before a non-functional Tribunal, and the petitioner sought protection against coercive recovery while offering security in the manner prescribed by the statute. The Court accepted that the petitioner should be protected against recovery of the disputed balance amount during the pendency of the appeal, provided adequate security was furnished to the satisfaction of the Assessing Authority within the stipulated time. The Court accordingly restrained coercive recovery in the meantime.

Conclusion: Protection against recovery of the balance amount was granted subject to furnishing adequate security.

Final Conclusion: The writ petition succeeded only to the limited extent of securing interim protection against recovery of the balance demand on furnishing security, while the prayer for refund of the amount already recovered was ed.

Ratio Decidendi: Where an appeal is pending and the assessee furnishes adequate security as prescribed, recovery of the disputed demand may be protected during the pendency of the appeal, but money already recovered by consent and without a subsisting stay is not ordinarily refundable.

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