Refund adjustment against disputed tax demand is governed by...

Refund adjustment against disputed tax demand is governed by binding recovery instructions and requires prior intimation. Where no stay was sought from the competent authority at the time of the initial adjustment, the recovery instructions did not support a refund claim, and refund of that amount was declined despite the lack of pre-adjustment opportunity. Conversely, adjustment made while stay applications and a representation to suspend recovery remained pending, after substantial recovery, constituted a colourable exercise of power. Failure to provide the required refund-adjustment intimation reinforced the defect; the later amount was refundable with applicable interest, while the statutory appeal required expedited disposal.