Advance licence imports: Rupee value exhaustion alone cannot deny duty-free clearance when foreign currency balance remains available.

Duty-free import benefit under a Value Based Advance Licence could not be denied merely because the Rupee-denominated licence value was exhausted, where sufficient balance remained in freely convertible currency. The licence values in Indian Rupees and US dollars had to be tracked with the prevailing exchange rate, and the Rupee balance could not be mechanically matched to the foreign currency balance. The policy circular treated the balance CIF value in freely convertible currency as the relevant factor for advance authorization clearances. On that basis, the available foreign currency balance covered the disputed imports, and denial of duty-free benefit was unjustified; the clearance was also revenue neutral.

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Issues: Whether duty-free import benefit under the Value Based Advance Licence could be denied merely because the Rupee value of the licence stood exhausted, despite availability of balance in freely convertible currency.

Analysis: The licence was issued with values expressed both in Indian Rupees and in US dollars, and the debit practice had to reflect the changing exchange rate over time. The balance in Rupees and the balance in foreign currency could not be equated by mechanically deriving a notional exchange rate from the closing balances. The Policy Circular clarifies that, for clearance of imports under advance authorization, the relevant factor is the balance CIF value in freely convertible currency, and exhaustion of the Rupee value by itself is irrelevant. In the circumstances, the balance foreign currency value was sufficient to cover the disputed imports, and the situation was also revenue neutral.

Conclusion: Denial of duty-free benefit was unjustified, and the assessee was entitled to clearance against the available foreign currency balance.

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