Approved classification at removal protects Modvat credit refund on exported goods and bars retrospective denial of input duty credit.

Approved classification and assessment of exported goods as patent and proprietary medicines at the time of removal could not be reopened retrospectively to deny Modvat credit or refund of unutilised credit on duty-paid inputs. The goods were exported under bond without duty, and the same goods had also been cleared to the market on payment of duty as patent and proprietary medicines, so the later contention that they were not such medicines was unsustainable. The refund claim was therefore admissible, and the denial of refund was set aside.

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Issues: Whether refund of unutilised Modvat credit was payable when the exported goods had been classified and assessed as patent and proprietary medicines at the time of clearance for export.

Analysis: The goods were classified and assessed for export as patent and proprietary medicines, and a bond was executed for export without payment of duty. The same goods were also cleared to the market as patent and proprietary medicines on payment of duty. In these circumstances, the later stand that the exported goods were not such medicines was not sustainable. Once the classification had been approved at the time of removal, it could not be displaced retrospectively to deny the Modvat credit already earned on duty-paid inputs. There was therefore no legal or factual basis to reject the refund claim.

Conclusion: The refund claim was admissible and the denial of refund was set aside in favour of the assessee.

Ratio Decidendi: An approved classification and assessment at the time of removal cannot be retrospectively altered to deny Modvat credit or refund of unutilised credit on input duty for exported final products.

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