Transferee importer exemption upheld where alleged Modvat breach by exporter was unsupported by tangible evidence.

A transferee importer clearing goods under a validly transferred DEEC licence could not be denied exemption under Notification No. 203/92-Cus merely because the original licence holder was alleged to have wrongly availed Modvat credit; the exporter's obligation was not automatically attributable to the transferee, so the exemption remained available. A show cause notice based only on an unsubstantiated allegation, without relied-upon documents or tangible proof such as Modvat records, could not sustain the demand, so the proceedings were rightly dropped and the Revenue's challenge failed.

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Issues: (i) Whether exemption under Notification No. 203/92-Cus could be denied to a transferee importer on the ground that the original licence holder allegedly availed Modvat credit and violated the notification condition. (ii) Whether a show cause notice alleging such violation, without relied upon documents or tangible evidence, could sustain the demand.

Issue (i): Whether exemption under Notification No. 203/92-Cus could be denied to a transferee importer on the ground that the original licence holder allegedly availed Modvat credit and violated the notification condition.

Analysis: The imported goods were cleared under legitimately transferred DEEC licences. The condition regarding non-availment of Modvat credit was attributable to the exporter/original licence holder, and not to the transferee importer. The settled position applied by the Tribunal was that a transferee importing under a validly transferred licence cannot be denied the exemption merely because the exporter's obligation regarding Modvat credit was alleged to have been breached.

Conclusion: The exemption could not be denied to the respondent on this ground.

Issue (ii): Whether a show cause notice alleging such violation, without relied upon documents or tangible evidence, could sustain the demand.

Analysis: The notice merely alleged that the exporter had wrongly declared non-availment of Modvat credit, but no relied upon document or supporting material was placed to show that the declaration was false. The alleged infraction required proof through documentary evidence such as Modvat invoices or records, and no such evidence was produced. The notice was therefore unsupported by material evidence and could not sustain the demand.

Conclusion: The demand was unsustainable for want of evidence.

Final Conclusion: The Revenue's challenge failed, and the order dropping the proceedings was upheld.

Ratio Decidendi: A transferee importer under a validly transferred licence cannot be denied exemption for an alleged breach of the exporter's Modvat-related condition unless the allegation is supported by tangible evidence establishing the violation.

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