Advance licence transferee liability fails where revenue cannot prove original holder's prohibited input credit availment.

A transferee of an advance licence cannot be required to prove, on its own, that the original licence-holder did not avail input-stage credit under Notification No. 203/92-Cus. Liability for breach of the exemption condition must be supported by evidence that the original manufacturer or exporter actually took the prohibited credit, and by material showing the transferee's involvement or knowledge of the breach. Where the show cause notice and record contain no concrete proof of such availment, suppression, or complicity, demand and penalty cannot be sustained against the transferee.

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Issues: Whether the transferee of an advance licence could be required to prove non-availment of input-stage credit by the original licence-holder and whether the demand and penalty could be sustained in the absence of evidence of such availment.

Analysis: The exemption under Notification No. 203/92-Cus operated subject to compliance with the condition that the original manufacturer or exporter had not availed input-stage credit under the Central Excise Rules, 1944. The appellant, being only a transferee, was not the manufacturer or exporter and would ordinarily have no direct knowledge of how the export obligation had been fulfilled. No allegation in the show cause notice or finding in the orders established that the appellant knew of any breach or had suppressed material facts. The record also did not show any concrete evidence from the manufacturer's statement or statutory registers to prove that such credit had in fact been availed. In these circumstances, the attempt to fasten liability on the transferee rested on assumption rather than proof.

Conclusion: The transferee could not be called upon to prove non-availment of input-stage credit by the original licence-holder, and the demand and penalty could not be sustained.

Final Conclusion: The impugned order was set aside and the appeal succeeded on the footing that liability under the exemption condition had not been established against the transferee.

Ratio Decidendi: A transferee of an advance licence cannot be made liable for breach of the non-availment condition unless the revenue establishes, on evidence, that the original licence-holder or manufacturer had in fact availed the prohibited credit and that the transferee was implicated in that breach.

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