Retrospective tax circulars cannot curtail a notification-based exemption or impose fresh liability without express statutory authority.

Special Additional Duty was not recoverable on clearances from a warehouse into the domestic tariff area where the exemption notification applied and the record showed VAT payment through a Chartered Accountant's certificate, with no contrary evidence. A subordinate circular could not add a fresh condition to restrict the exemption already granted, and a measure creating additional tax liability was substantive rather than merely clarificatory. It therefore could not operate retrospectively unless the statute expressly so provided. The exemption remained available to the assessee and the SAD demand was unsustainable.

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Issues: Whether Special Additional Duty was recoverable on clearances from the warehouse into the domestic tariff area and whether the exemption notification could be restricted by a subsequent circular with retrospective effect.

Analysis: The exemption under the notification applied to goods cleared from a special economic zone into India, subject to the condition that sales tax or value added tax was payable on sale in the domestic tariff area. The record contained a Chartered Accountant's certificate indicating payment of VAT, and no contrary enquiry or evidence was shown. A circular could not add a new condition to restrict the benefit already granted by the notification, and a measure imposing additional tax liability could not operate retrospectively unless the legislation itself so provided. The later circular was therefore treated as introducing a substantive restriction rather than merely clarifying an existing ambiguity.

Conclusion: The demand of Special Additional Duty was not sustainable and the exemption remained available to the assessee.

Ratio Decidendi: A subordinate circular cannot retrospectively curtail an exemption conferred by a notification, and any provision or clarification that imposes a fresh tax burden is substantive and operates prospectively unless the statute expressly provides otherwise.

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