Refund adjustment barred where an excise demand was already set aside as time-barred and no longer legally recoverable.

A demand of differential excise duty that had already been set aside as time-barred could not be treated as legally recoverable for adjustment against a refund payable to the assessee. Because the Department did not challenge the order annulling the demand on limitation grounds, it had no subsisting enforceable claim and could not deduct that amount from the refund. The adjustment was therefore impermissible and the assessee prevailed.

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Issues: Whether the Department could adjust a demand of differential excise duty against the refund payable to the assessee when the demand had already been set aside as time-barred.

Analysis: The assessee had challenged the assessment endorsement under RT 12 before the Assistant Collector, after which a notice was issued and the demand was confirmed. That demand was later set aside by the Collector (Appeals) as beyond limitation, and the Department did not challenge that order. In these circumstances, the demand could not be treated as legally recoverable so as to permit deduction from the amount refundable to the assessee.

Conclusion: The adjustment was impermissible and the assessee succeeded.

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