Transferred advance licence exemption cannot be denied where Customs lacks a contrary notification bar and no credit was taken by importer.

Customs could not deny duty-free import exemption under a validly transferred advance licence merely because the transferor had availed Modvat credit, where the appellant itself had not taken such credit and no fraud in obtaining the licence was alleged. The Tribunal applied the principle that a licence validly endorsed by the competent licensing authority cannot be questioned by Customs unless the exemption notification itself contains a contrary restriction. On that basis, the denial of exemption was unsustainable, and the demand and penalties did not survive.

---

---

Issues: Whether Customs authorities could deny the benefit of duty-free import exemption on the ground that the transferor had availed Modvat credit, despite the licence having been validly transferred and the appellant not having availed such credit.

Analysis: The appellant imported goods duty free under a transferable advance licence issued by the competent authority. The record showed that the appellant itself had not availed any Modvat credit on the imported goods, and there was no allegation that the licence was fraudulently obtained. The relevant exemption conditions did not contain any provision enabling Customs to disregard the endorsement and transfer recognised by the licensing authority. Following the principle that a valid licence or its endorsement by DGFT cannot be questioned by Customs in the absence of a contrary stipulation in the exemption notification, the Tribunal held that the denial of exemption on the basis of credit taken by the transferor was unsustainable.

Conclusion: The issue was decided in favour of the assessee; the demand and penalties were not sustainable.

Ratio Decidendi: Where a transferable licence is validly endorsed by the competent licensing authority and the exemption notification does not prohibit such reliance, Customs cannot deny the exemption on the ground that the transferor had availed credit.

---