Valid exemption clearance survives later withdrawal of permission where prescribed procedure was followed and export use was established.

Clearance of nylon yarn under Rule 191BB and Notification No. 33/90-C.E. (N.T.) remained exempt where both buyer and supplier held valid permission and the prescribed procedure was followed; a later withdrawal of permission operated only prospectively and did not negate the completed transaction. Nylon tyre cord fabrics cleared to an advance licence holder and used in manufacture of exported tyres were also not liable to duty, as the export obligation was discharged through actual export use. The note states that duty demand on both clearances was unsustainable and the exemption could not be denied on the basis of subsequent withdrawal of permission.

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Issues: (i) Whether duty could be demanded on nylon yarn cleared without payment of duty under Rule 191BB and Notification No. 33/90-C.E. (N.T.) when the buyer's permission was subsequently withdrawn. (ii) Whether duty could be demanded on nylon tyre cord fabrics cleared to the advance licence holder and used in manufacture of exported tyres.

Issue (i): Whether duty could be demanded on nylon yarn cleared without payment of duty under Rule 191BB and Notification No. 33/90-C.E. (N.T.) when the buyer's permission was subsequently withdrawn.

Analysis: During the relevant period, the buyer held valid permission to procure the yarn without payment of duty, and the appellant had corresponding permission to effect the clearance. The prescribed procedure under Rule 191BB and the notification was followed. The later withdrawal of permission was stated to operate only prospectively and did not undo a transaction already completed under valid authority.

Conclusion: The duty demand on the nylon yarn is not sustainable and the issue is decided in favour of the assessee.

Issue (ii): Whether duty could be demanded on nylon tyre cord fabrics cleared to the advance licence holder and used in manufacture of exported tyres.

Analysis: The fabrics were cleared to the advance licence holder and were admittedly used in the manufacture of tyres exported in discharge of the export obligation. On these facts, there was no basis to fasten duty on the clearance of the fabric.

Conclusion: The duty demand on the nylon tyre cord fabrics is not sustainable and the issue is decided in favour of the assessee.

Final Conclusion: The entire duty demand was set aside, and the appeal succeeded.

Ratio Decidendi: A clearance made under valid subsisting permission and in compliance with the prescribed exemption procedure cannot be denied exemption merely because the permission is later withdrawn prospectively.

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