Adjustment of sanctioned refund against disputed excise demands was set aside where the liabilities were still under appeal.

Sanctioned refund cannot be appropriated against disputed excise demands when the underlying liabilities are under appeal and are not finally recoverable. The Tribunal noted that the authorities had adjusted the refund under Section 11 of the Central Excise Act, 1944 read with Rule 230 of the Central Excise Rules, 1944, but the appellate challenges to the demands were still pending and, in some cases, stay was pending or granted. As the precondition for lawful adjustment was not satisfied, the appropriation was held erroneous and set aside in favour of the assessee.

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Issues: Whether the Department was justified in adjusting the sanctioned refund against the outstanding demands when the demands were under challenge in appeal and, in some cases, stay was pending or granted.

Analysis: The refund had been sanctioned, but the authorities appropriated it towards alleged arrears under Section 11 of the Central Excise Act, 1944 read with Rule 230 of the Central Excise Rules, 1944. The appeals against the underlying demands were pending before the appellate forums, and on the material before the Tribunal it was not possible to treat the amounts as finally recoverable or due. In these circumstances, the precondition for adjustment under Section 11 was not satisfied.

Conclusion: The adjustment was held to be erroneous and was set aside in favour of the assessee.

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