Proforma credit and natural justice protect granted fiscal relief where remission is notified and withdrawal occurs without hearing.

Proforma credit under Rule 56-A could not be denied solely because the inputs and finished goods fell under different tariff items where the Central Government had specifically sanctioned remission of duty on the inputs by notification; the saving provision protected the assessee's credit claim. Withdrawal of an already granted permission to avail proforma credit also required notice and an opportunity of hearing, because natural justice applied before affecting an accrued fiscal right. The document states that both grounds favoured the assessee and the claimed relief was ultimately upheld.

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Issues: (i) Whether proforma credit under Rule 56-A could be denied merely because the inputs and finished goods fell under different tariff items when the Central Government had sanctioned remission of duty by notification. (ii) Whether the permission earlier granted to avail proforma credit could be withdrawn without notice or hearing.

Issue (i): Whether proforma credit under Rule 56-A could be denied merely because the inputs and finished goods fell under different tariff items when the Central Government had sanctioned remission of duty by notification.

Analysis: The proviso to Rule 56-A(2)(ii) allowed denial of credit where the inputs and finished goods did not fall under the same tariff item, but clause (b) preserved credit where remission or adjustment of duty on the inputs had been specifically sanctioned by the Central Government. Notification No. 75/71 provided such remission for the inputs used by the appellants. The authorities ignored this saving provision and proceeded only on the basis of difference in tariff classification.

Conclusion: The denial of proforma credit on the ground of different tariff items was not justified and was against the assessee.

Issue (ii): Whether the permission earlier granted to avail proforma credit could be withdrawn without notice or hearing.

Analysis: The grant of permission conferred a right on the manufacturer, and its withdrawal affected that right. Even where Rule 56-A(4) empowered withdrawal for breach, the requirements of natural justice called for notice and an opportunity of hearing before such withdrawal. No show cause notice was issued and no hearing was afforded before the permission was withdrawn.

Conclusion: The withdrawal of permission without notice or hearing was invalid and the assessee succeeded on this ground as well.

Final Conclusion: The appeal was allowed and the orders of the authorities below were set aside, with the assessee held entitled to the claimed relief.

Ratio Decidendi: Credit under Rule 56-A cannot be denied merely because inputs and finished goods fall under different tariff items where the Central Government has specifically sanctioned remission or adjustment of duty on the inputs, and withdrawal of a granted fiscal permission must comply with natural justice.

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