Bona fide transferee rights under DEPB scrips protected; duty recovery and extended limitation were unavailable after later fraud cancellation.

Duty foregone could not be recovered from a transferee-importer who had used DEPB scrips purchased in good faith, because the scrips were valid when relied on and were cancelled only later after fraud by the original holder came to light. Where the transferee was neither involved in nor aware of the fraud, its bona fide rights could not be defeated merely by the later cancellation of the licences. On the same facts, the ingredients for extended limitation were absent, as there was no misstatement, suppression, or collusion attributable to the transferee. The extended period under the Customs Act was therefore not invocable.

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Issues: Whether duty foregone could be recovered from a transferee-importer who had imported goods against DEPB scrips purchased in good faith, after the scrips were later cancelled for fraud committed by the original holder, and whether the extended limitation period under the Customs Act, 1962 could be invoked.

Analysis: The DEPB scrips were valid when used for import and were cancelled only later after the department discovered that the original holder had obtained them on the basis of forged documents. There was no allegation or evidence that the transferee-importer was a party to the fraud or had knowledge of it. Applying the principle that a licence or similar transfer right obtained by fraud is voidable and remains effective until avoided in the manner prescribed by law, the imported goods could not be treated as imported without authority merely because the original holder's fraud came to light later. On the same reasoning, the transferee's bona fide rights could not be defeated, and the ingredients for invoking the extended period on the basis of misstatement, suppression, or collusion were absent.

Conclusion: Duty could not be demanded from the transferee-importer, and the extended period under the proviso to Section 28(1) of the Customs Act, 1962 was not invocable.

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