Tribunal Confirms Transferees Entitled to License Benefits Without Impossible Conditions; DGFT Certification is Binding.

The Tribunal ruled in favor of the appellants, determining that the transferee of a license is entitled to the benefits of Notification No. 203/92-Cus. without needing to fulfill conditions that are the original licensee's responsibility. Applying the legal maxim "LEX NON COGIT AD IMPOSSIBILIA," the Tribunal concluded that the transferee cannot be compelled to perform impossible acts, such as verifying the original licensee's actions. The Customs Department must accept the DGFT's certification of transferability, limiting its role to procedural compliance at importation. The decision affirms that the DGFT's certification is binding and cannot be re-evaluated by Customs.

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Issues Involved:
1. Applicability of the legal maxim "LEX NON COGIT AD IMPOSSIBILIA" to a valid recognized transferee for availing the DEEC exemption Notification.
2. Whether the original licensee or the transferee of the license must satisfy the conditions of the DEEC exemption Notification.

Issue-wise Detailed Analysis:

1. Applicability of the Legal Maxim "LEX NON COGIT AD IMPOSSIBILIA":

The legal maxim "LEX NON COGIT AD IMPOSSIBILIA," meaning "the law does not compel a man to do that which he cannot possibly perform," was considered in the context of the transferee of an advance license. The Tribunal noted that the transferee of the license cannot be compelled to fulfill conditions that are beyond their control, such as proving that the original licensee did not avail of Modvat credit. The Tribunal emphasized that once the license is transferred with the endorsement of transferability by the DGFT, the transferee should be presumed to have fulfilled all conditions unless proven otherwise by the Customs Department. The principle was supported by the decision in the case of M/s. Special Steels Ltd., which highlighted that the transferee cannot be expected to perform an impossible act, such as verifying the actions of the original licensee.

2. Responsibility to Satisfy Conditions of the DEEC Exemption Notification:

The Tribunal examined the conditions of Notification No. 203/92-Cus. and determined that certain conditions, such as the execution of a bond and the non-availment of Modvat credit, are primarily the responsibility of the original licensee. The satisfaction of these conditions by the original licensee is verified by the DGFT before endorsing the transferability of the license. The Customs Department cannot re-evaluate the fulfillment of these conditions once the DGFT has certified them. This is in line with the principle that the satisfaction arrived at by the DGFT is binding on the Customs Department. The Tribunal cited several judicial precedents, including the Supreme Court's decision in Chunni Lal Parshidai Lal and ITC v. CCE, which established that the Customs Department cannot question the certification provided by the DGFT.

Notification No. 203/92-Cus. Conditions and Compliance:

The Tribunal detailed the conditions of Notification No. 203/92-Cus., emphasizing that:

- Condition (i) requires materials to be covered by a Value Based Duty Exemption Entitlement Certificate.
- Condition (ii) involves the execution of a bond and a declaration by the importer, which is not necessary if the export obligation is already discharged.
- Condition (v) mandates the fulfillment of export obligation without availing Modvat credit, which is verified by the DGFT.
- Condition (vii) allows the benefit of the Notification to a transferee if the license bears the endorsement of transferability by the DGFT.

The Tribunal concluded that the transferee, who imports goods based on a transferred license, is deemed to have satisfied these conditions once the DGFT has endorsed the license as transferable. The Customs Department's role is limited to ensuring the procedural compliance at the time of import and cannot question the DGFT's certification regarding the discharge of export obligations.

Judicial Precedents and Legal Principles:

The Tribunal relied on various judicial precedents to support its conclusions, including:

- The Gujarat High Court's decision in Mahendra Petrochemicals Ltd. v. UOI, which affirmed that the DGFT's certification is binding on the Customs Department.
- The Supreme Court's decision in ITC v. CCE, which held that the Customs authorities must act based on the certifications provided by the relevant authorities without re-evaluating them.
- The Bombay High Court's decision in Taparia Overseas (P) Ltd., which established that the concept of fraud vitiating everything does not apply to bona fide transactions involving valuable consideration.

Conclusion:

The Tribunal upheld the contentions raised by the appellants, concluding that the transferee of the license is entitled to the benefit of Notification No. 203/92-Cus. without being required to fulfill conditions that are the responsibility of the original licensee. The legal maxim "LEX NON COGIT AD IMPOSSIBILIA" was invoked to support this conclusion, emphasizing that the law does not compel the transferee to perform impossible acts. The reference was answered in favor of the appellants, allowing them to claim the exemption under the Notification.

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