Question: I’ve seen it done in Harry Potter I just don’t understand when its okay to do it, like can I say something like “John walked away from the house and was now walking along the road” or not? When is it acceptable?

Answer: 
In a past tense story, "now" means "at the moment in question," not at the "present."
If English if not your first language the usage of "now" is difficult to fully comprehend. It has many nuanced translations but is most often used to mean "in this moment". It is also used to emphasise a statement.

"Now Daddy didn't take too kindly his only daughter dating a black boy."

"They put the homeless kids in cages, now that ain't right."

Your sentence is acceptable.