First of all, enable web API for admin and test with the admin user. If that gives the same, then there is a set up problem with Sage. If you can get in with admin, then it is a set up problem with the user. Did you create a security group for the web API user? If so, what authorisations did you give it? In the AR module did you give it Sage 300 Web API access? What other modules have you got active? Enable all for common services, and administrative services, and then strip back as required until it doesn't work.

Doesnt work with ADMIN. created a new VM installed Sage on it and it worked for ADMIN. So now in my production environment i am thinking will a sage repair help fix the issue ? if it doesnt then means i need a clean OS Windows and start again.