Retrospective duty demand barred where clearance permission was final and unchallenged, with no show cause notice for past liability.

Permission granted to clear goods under Section 3, coupled with a stated year-end review, could not be retrospectively displaced to demand duty under Rule 96ZO for the earlier period when the assessee had acted on that permission and the assessments were not provisional. The authority could not later resile from the unchallenged permission, reopen the settled position, or impose past liability without a show cause notice. On that basis, the proposed duty demand, reversal of Modvat credit, and interest for the prior period were held unsustainable and were set aside in favour of the assessee.

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Issues: Whether the Revenue could, after granting permission to the assessee to clear goods under Section 3, retrospectively demand duty under Rule 96ZO and require reversal of Modvat credit and payment of interest for the earlier period.

Analysis: The permission granted by the departmental authority allowed the assessee to continue under Section 3 for the relevant clearances and specifically stated that the arrangement would be reviewed at the end of each financial year. The assessee acted on that permission and discharged duty accordingly. The assessments for the period were not provisional. In these circumstances, the authority could not later take a contrary stand on the ground that the earlier permission had been granted in haste, nor could it reopen the matter and raise duty demand for the past period without any show cause notice. Since the permission had not been challenged, it had attained finality.

Conclusion: The demand of duty, the direction to reverse Modvat credit, and the levy of interest were not sustainable and were set aside in favour of the assessee.

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