Transferred DEEC licence still requires nexus with export product for duty exemption, but may protect against confiscation and penalty.

Under a transferred DEEC licence, customs duty exemption was available only for materials required for manufacture of the export product, so the imported goods had to bear the requisite nexus with that product. Transferability of the licence did not remove this substantive condition at import stage, and exemption was denied where the imported marble had no such nexus, sustaining the duty demand. However, because the transferred licence covered the goods in generic terms, the import was not treated as unauthorised merely for lack of exemption entitlement, so confiscation and penalty were not sustainable and were set aside.

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Issues: (i) Whether an importer under a transferred DEEC licence could claim customs duty exemption for goods having no nexus with the export product. (ii) Whether confiscation and penalty were sustainable where the imported goods were covered by the transferred licence but lacked nexus with the export product.

Issue (i): Whether an importer under a transferred DEEC licence could claim customs duty exemption for goods having no nexus with the export product.

Analysis: The exemption under Notification No. 80/95-Cus. extended only to materials required for manufacture of export products. The DEEC scheme and the notification contemplated a nexus between the imported goods and the exported product. Transferability of the licence did not dispense with that substantive requirement at the stage of import, particularly where customs had not earlier examined the proposed import goods. Since the imported marble had no nexus with the exported marble product, the exemption could not be granted.

Conclusion: The exemption claim failed and duty demand was upheld.

Issue (ii): Whether confiscation and penalty were sustainable where the imported goods were covered by the transferred licence but lacked nexus with the export product.

Analysis: Although nexus was required for duty exemption, the transferred licence itself covered the imported goods in generic terms. On that basis, the import could not be treated as unauthorized or liable to confiscation and penalty merely because the exemption benefit was unavailable.

Conclusion: Confiscation and penalty were set aside.

Final Conclusion: The appeal succeeded only on the duty demand issue, while the order of confiscation and penalty was annulled, resulting in a mixed outcome.

Ratio Decidendi: Under a transferred DEEC licence, customs duty exemption is available only if the imported goods have the required nexus with the export product; transferability of the licence does not by itself eliminate that condition, though imports covered by the licence may still avoid confiscation and penalty.

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