Time-barred tax demand cannot be adjusted against refund where the claim is no longer legally recoverable.

A statutory recovery provision allowing deduction of sums "payable" cannot be used to realise a demand that is already time-barred, because a barred claim is not legally recoverable. The provision operates only as a mode of collecting amounts lawfully due and does not revive an unenforceable debt. General debtor-creditor appropriation principles under the Contract Act do not apply to a statutory refund adjustment, especially where the assessee objects to the set-off. On that basis, the proposed deduction from the refund was unsustainable and the departmental adjustment could not be maintained.

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Issues: Whether a demand barred by limitation could be treated as "payable" and recovered by deduction from amounts due to the assessee under section 11 of the Central Excises and Salt Act, 1944, and whether the Department could justify adjustment on general principles of debtor-creditor appropriation under section 60 of the Indian Contract Act, 1872.

Analysis: The claim sought to be recovered had admittedly become time-barred. The expression "payable" in the recovery provision was read as referring to a legally recoverable amount and not to a debt that could no longer be enforced in law. The recovery section provided a mode of realisation of sums lawfully due; it did not create a source of authority to revive a barred demand. The general rule of appropriation of payments under the Contract Act was also inapplicable because the adjustment arose in a statutory refund context, not in an ordinary contractual debt situation, and the assessee had objected to the proposed adjustment.

Conclusion: The time-barred demand could not be deducted from the refund due to the assessee, and the Department's attempt to adjust the amount was not sustainable.

Final Conclusion: The appeal failed, and the order quashing the departmental demand and adjustment was left undisturbed.

Ratio Decidendi: A statutory recovery provision authorising deduction of sums "payable" cannot be used to recover or appropriate a demand that is barred by limitation, because a time-barred amount is not legally recoverable.

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