Refund adjustment requires a legally determined duty liability; unraised and unadjudicated demands cannot be set off against refunds.

Refund amounts under central excise law cannot be adjusted against a duty demand unless that liability has been properly raised by notice and validly adjudicated. A lawful set-off may be made only against an existing, legally determined duty liability; deduction from the refund in the absence of reassessment and notice was contrary to law and was rejected in favour of the assessee.

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Issues: Whether the Revenue could adjust the refund payable to the assessee against duty allegedly payable under Item No. 68 of the Central Excise Tariff Schedule in the absence of proper notice and reassessment.

Analysis: The refund arose pursuant to the earlier revision order holding that flush doors did not fall under Item No. 16B but under Item No. 68 of the Central Excise Tariff Schedule. In the connected matter already decided by the Tribunal, following the Delhi High Court, it was held that while a lawful adjustment against an existing duty liability may be permissible, no adjustment can be made against a demand that has neither been raised by notice nor validly adjudicated and reassessed. The impugned deduction from the refund was therefore contrary to law.

Conclusion: The Revenue was not entitled to appropriate the refund towards Item No. 68 duty in the absence of proper notice and reassessment; the objection to the deduction succeeded in favour of the assessee.

Ratio Decidendi: A refund cannot be adjusted against an unraised and unadjudicated duty demand; set-off is permissible only against a legally determined liability.

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