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Here are two things to check:
The policy that you are trying to apply using the Service should not be one of your "My Policies". Instead it should be in a Policy Set that you can see in the Rights Management Admin UI.
Be sure that you know which user is indeed invoking "Apply Policy" in the Rights Management Service. If your process is short lived and your caller is "cblue" then yes, the default behavior is for the Apply Policy operation to be invoked as "cblue" also. You should make sure that this user is in the "Document Publishers" list for your Policy Set. This is done so that you can control which policies are available to different users.
I've fixed this issue, although I can not apply a policy set,
we all know the RM plug in which enables the user to apply a policy to a word doc or excel file.
Are there any possibilities to do this automated in a process?
Can you tell us what fixed the issue for you? Was it related to trying to use "My Policies".
I am sorry we do not have support yet on the server for applying a policy to office documents similar to the desktop ability.