Illegal permission cannot defeat duty recovery, while an alternative Rule 56A plea requires factual verification on remand.

Permission granted under Rule 57F(2) could not protect the assessee from duty recovery where the goods were outside the notified Modvat scheme, because a permission contrary to the statutory framework creates no enforceable right and there is no estoppel against law. The article also notes that an alternative plea under Rule 56A had to be examined, since that defence could be raised at any stage and depended on factual verification of duty-free and duty-paid quantities, exclusion of imported inputs, and correlation between removed polyester yarn and exported or duty-paid texturised yarn. The matter therefore required fresh adjudication on those factual issues.

---

---

Issues: (i) whether permission granted for removal of polyester yarn under Rule 57F(2) could protect the assessee from duty demand when the goods were not notified under the Modvat scheme, and (ii) whether the availability of Rule 56A and the related export-based and factual claims required reconsideration by the adjudicating authority.

Issue (i): whether permission granted for removal of polyester yarn under Rule 57F(2) could protect the assessee from duty demand when the goods were not notified under the Modvat scheme.

Analysis: The permission was found to have been granted in a situation where neither the input nor the finished product was covered by the notified Modvat framework. A permission contrary to law cannot create an enforceable right in favour of the assessee, and there can be no estoppel against law. Earlier decisions were distinguished because they turned on departmental understanding or circumstances supporting the permission, whereas the present permission was plainly inconsistent with the statutory scheme.

Conclusion: The assessee could not rely on the wrongly granted permission to defeat recovery of duty.

Issue (ii): whether the availability of Rule 56A and the related export-based and factual claims required reconsideration by the adjudicating authority.

Analysis: The adjudicating authority had declined to examine the alternative plea based on Rule 56A, though such a plea could be raised at any stage and required a finding. The matter also involved factual verification regarding segregation of duty-free and duty-paid quantities, exclusion of imported quantities, and correlation between the polyester yarn removed and the texturised yarn ultimately exported or cleared on duty payment. These aspects could not be finally resolved without field-level verification and fresh adjudication.

Conclusion: The matter had to be reconsidered by the adjudicating authority on the alternative plea and the necessary factual issues.

Final Conclusion: The demand could not be defeated on the basis of an illegal permission, but the matter was not finally concluded because the alternative statutory plea and related factual questions required fresh adjudication.

Ratio Decidendi: A permission or facility granted contrary to the statutory scheme does not bind the revenue, because there is no estoppel against law, and an alternative statutory defence requiring factual verification must be considered on remand.

---