Erroneous refund recovery requires setting aside the refund order first; a Section 11A notice alone is insufficient.

Recovery of an alleged erroneous refund could not be sustained where the refund order issued by the Assistant Commissioner remained unchallenged and in force. The Tribunal held that a notice under Section 11A alone was insufficient to recover the amount; the proper course was to first set aside the refund order through the prescribed appellate or review mechanism under Section 35E(2). As no such action had been taken, the recovery proceedings were invalid, the demand was set aside, and relief followed in favour of the assessee.

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Issues: Whether recovery of an alleged erroneous refund could be sustained under Section 11A without first setting aside the refund order under Section 35E(2).

Analysis: The refund had been sanctioned by the Assistant Commissioner and that order had not been appealed against. The recovery notice was issued only under Section 11A. The Tribunal applied the principle that recovery of an erroneous refund requires appropriate action to challenge the refund order itself and that a notice under Section 11A alone does not validly recover the amount when the refund order remains in force.

Conclusion: The recovery proceedings were invalid and the issue was decided in favour of the assessee.

Final Conclusion: The demand arising from the alleged erroneous refund was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: An erroneous refund cannot be recovered merely by issuing a notice under Section 11A if the refund order has not been set aside through the prescribed appellate or review mechanism.

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