Refund adjustment against assessed tax liability is lawful despite unused payment time under the demand notice.

Refund adjustment under the Kerala Value Added Tax Act was upheld where the assessing authority set off excess tax refundable to the dealer against an amount already determined by assessment. Section 89(3) was read as permitting adjustment of the refundable sum towards any amount due on the date of adjustment, and "amount due" was treated as an assessed liability, even if the period for payment under the demand notice had not expired. Section 31(2), which regulates the time for payment after notice of demand, was held not to bar such adjustment. The argument based on a possible appeal and pre-deposit requirement was rejected as speculative because no appeal had been filed.

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Issues: Whether the assessing authority was justified in adjusting the refund payable to the assessee against the tax liability already determined, without first issuing a separate notice under Section 31(2) of the Kerala Value Added Tax Act, 2003 and without awaiting expiry of the time for payment.

Analysis: Section 89(1) contemplates refund of tax paid in excess, while Section 89(3) expressly empowers the assessing authority to adjust the refundable amount towards recovery of any amount due from the dealer on the date of adjustment. The expression "amount due" was held to mean liability already ascertained by an assessment order, even if the dealer may still have time to pay under the notice of demand. The Court held that Section 31(2), which prescribes time for payment after a demand notice, governs ordinary recovery and does not prohibit adjustment under Section 89(3). The plea based on a possible appeal and the 20% pre-deposit regime was treated as conjectural, since no appeal had been filed.

Conclusion: The adjustment was lawful and the challenge to the assessment and demand failed.

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