File photo of Asylum seekers from Afghanistan, Iraq and Iran crying as Indonesian officers force them to leave the Australian vessel Hermia. PHOTO: REUTERS
The row, which came with tensions already high between Jakarta and Canberra over a spying controversy, prompted fresh questions about new Australian Prime Minister Tony Abbott's hardline asylum-seeker policies.
The Australian boat picked up some 60 would-be refugees south of Java, where many asylum seekers board rickety wooden vessels to try and reach Australia, on Thursday after a distress call, according to Indonesian officials.
Under Abbott's tough refugee policies, asylum-seekers arriving by unauthorised boats face the prospect of their vessels being turned back to Indonesia if it is safe to do so.
But Jakarta has previously voiced anger about the policies, and on Friday angrily rejected the idea of the asylum seekers being returned to Java.
"The Indonesian government NEVER AGREED to such wishes or policies of Australia," Djoko Suyanto, co-ordinating minister for political, legal and security affairs told AFP in a text message.
"This has been conveyed since the time of (former Australian premier) Kevin Rudd, and there is NO CHANGE of policy regarding asylum seekers wanting to go to Australia under the current Abbott government.
"Australia already has its own 'detention centres' in Nauru and PNG (Papua New Guinea). That's where the asylum seekers should be sent, NOT TO Indonesia."
He also reportedly said that in previous cases where Indonesia had accepted asylum seekers picked up by Australian vessels, it was only when people were hurt or had drowned.
Thousands of asylum seekers, many from Iran and Afghanistan, board rickety, wooden boats in Indonesia every year to try and make the perilous see crossing to Australia, normally arriving at the Australian territory of Christmas Island.
But continued arrivals of boatpeople is deeply sensitive in Australia, and stopping the influx was a key issue at the September elections that brought Abbott to power.
Lieutenant General Angus Campbell, commander of Canberra's military-led effort to stop people-smuggling boats arriving, told reporters in Sydney an Australian vessel went to the aid of an Indonesian boat 43 nautical miles south of Java.
"I am advised that all people have been accounted for," he said.
Agus Barnas, a senior official at the co-ordinating ministry for political, justice and security affairs, reiterated Suyanto's tough stance, telling AFP that Indonesia "rejects taking asylum seekers, that's our stance for the time being.
"We are still negotiating with Australia on this matter."
In Australia, Abbott faced questions about whether the stand-off signalled his hardline policies were a failure, but would only respond by saying that Canberra has "good and improving cooperation with Indonesia".
"Everyone in the official establishment of Indonesia understands that it is in Indonesia's national interest, just as much as it is in Australia's national interest, that the scourge of people smuggling be eliminated," he said.
Some critics have accused Australia of abandoning its obligations to the UN convention on refugees through its new policy.
Tensions between Jakarta and Canberra rocketed in the past week after the Sydney Morning Herald newspaper reported that Australian missions across Asia, including the one in Jakarta, were involved in a US-led spying network.
The paper amplified a report in German weekly magazine Der Spiegel, which was based on leaked documents from fugitive intelligence analyst Edward Snowden.
The allegations of espionage prompted Indonesia to summon the Australian ambassador, while Foreign Minister Marty Natalegawa declared "enough is enough".
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