Approved classification cannot be retrospectively disturbed; duty demands for past clearances were unsustainable.

A show cause notice cannot retrospectively unsettle an approved classification list and demand duty for a past period when duty was paid on clearance through gate passes, as that supports the presumption that clearances were made under the approved classification. If the Department considers the approved classification incorrect, the proper course is to seek re-classification prospectively, not impose retrospective liability. A notice that attempts to override the approved classification for earlier periods is unsustainable in law, and proceedings founded on it fail.

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Issues: Whether the show cause notice could unilaterally unsettle an approved classification and sustain a demand of duty for the past period.

Analysis: Duty had been paid on clearance on the strength of gate passes, raising the presumption that the goods were cleared under an approved classification list. In such a situation, if the Department considered the approved classification incorrect, the proper course was to seek re-classification only for the prospective period. The notice instead purported to set aside the approved classification and demand duty retrospectively, which rendered the notice and the proceedings founded on it unsustainable in law.

Conclusion: The notice and the proceedings based on it were held to be bad in law, and the revenue appeal was dismissed.

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