Transferable advance licences and Modvat credit: duty could not be fastened on the transferor, and exemption denial lacked proof.

Imports made by the transferee under transferable advance licences could not be used to fasten duty on the original licencee once the export obligation had been completed and the licences were transferred; any liability, if otherwise recoverable, lay against the actual importer. Denial of exemption based on alleged Modvat credit was also unjustified because the record did not establish a clear nexus between the credit availed and the relevant exports, and the departmental communication itself was uncertain on correlation and indicated reversal of credit. The impugned order was therefore unsustainable, and relief followed.

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Issues: (i) Whether duty demand arising from imports made against transferable advance licences could be fastened on the original licensee after transfer of the licences to the actual importer. (ii) Whether the benefit of the exemption notification could be denied on the ground that Modvat credit had been availed on inputs used in the exported goods.

Issue (i): Whether duty demand arising from imports made against transferable advance licences could be fastened on the original licensee after transfer of the licences to the actual importer.

Analysis: The imports were effected by the transferee of the advance licences, and the original licensee had already completed the export obligation and transferred the licences. Liability, if any, therefore attached to the person who actually imported the goods under the transferred licences.

Conclusion: The duty demand could not be confirmed against the original licensee and was recoverable, if at all, from the actual importer.

Issue (ii): Whether the benefit of the exemption notification could be denied on the ground that Modvat credit had been availed on inputs used in the exported goods.

Analysis: The material on record did not establish a clear nexus between the alleged availment of Modvat credit and the relevant exports. The departmental communication itself was uncertain on correlation with the shipping bills and advance licences, and it also indicated reversal of credit.

Conclusion: Denial of the notification benefit was not justified.

Final Conclusion: The impugned order was unsustainable in law and the appellant was entitled to relief.

Ratio Decidendi: Where imports are made by a transferee under a transferable advance licence, duty cannot be fastened on the original transferor, and denial of an exemption benefit requires clear evidence establishing the disqualifying condition.

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