Retrospective effect in tax policy cannot reopen a valid Modvat reversal made under the earlier duty-free import regime.

Reversal of Modvat credit made to enable duty-free imports under Notification No. 204/92-Cus. was treated as valid under the then prevailing DEEC/EXIM regime, and a later change in the EXIM Policy from 1-4-1995 did not retrospectively alter that completed transaction. A subsequent policy or legal change confers no benefit on past transactions unless retrospective effect is expressly provided. On that basis, a refund claim based on the later policy change was not admissible, and rejection of the claim was justified.

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Issues: Whether the refund claim arising from reversal of Modvat credit, made to facilitate duty-free import under Notification No. 204/92-Cus., was admissible after the subsequent change in the EXIM Policy with effect from 1-4-1995.

Analysis: The reversal of Modvat credit was admittedly made in accordance with the then prevailing provisions of Notification No. 204/92-Cus. to enable the exporter to obtain duty-free inputs under the DEEC scheme. The later change in the EXIM Policy did not operate retrospectively and could not alter the legal effect of a reversal already made under the existing regime. A subsequent change in law confers no benefit on past transactions unless retrospective operation is expressly provided.

Conclusion: The refund claim was not admissible and its rejection was justified.

Final Conclusion: The appeal failed because the refund claim was governed by the law in force at the time of clearance and the later policy change did not undo the earlier valid reversal of credit.

Ratio Decidendi: A subsequent change in policy or law does not affect a transaction completed under the earlier legal regime unless retrospective effect is expressly provided.

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