Actual user condition under an import licence sustained confiscation, but a bona fide financing bank escaped redemption fine.

Imported goods covered by licences subject to an actual user condition remained liable to confiscation where the condition could not be fulfilled and the licensing endorsement was later cancelled, confirming the customs objection that clearance was not valid under the licence terms. A financing bank that merely opened the letter of credit and paid on the strength of the licensing endorsement, without mala fides or participation in any misrepresentation, should not bear the redemption burden; the redemption fine was remitted as against the bank.

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Issues: Whether goods imported under licences subject to an actual user condition were liable to confiscation after the licensing authority cancelled the endorsements, and whether the redemption fine imposed on the financing bank should be sustained.

Analysis: The import licences were issued subject to a specific condition that the imported goods had to be used by the manufacturer-exporter for the prescribed purpose. The customs authorities had objected to clearance at the threshold on the ground that the imported item had no use in the tanning industry and therefore the licence condition could not be complied with. The later cancellation of the endorsements only confirmed that initial objection. On that basis, the goods could not be treated as validly imported in breach of the licence conditions and remained liable to confiscation. At the same time, the bank had merely opened the letter of credit and made payment on the faith of endorsements made by the licensing authority, without any allegation of mala fides or participation in the alleged misrepresentation. In those circumstances, the bank ought not to be saddled with the redemption burden.

Conclusion: The confiscation of the goods was sustained, but the redemption fine was remitted in favour of the assessee bank.

Final Conclusion: The appeal succeeded to the limited extent of relieving the bank from the redemption fine, while maintaining the confiscability of the imported goods and declining any recommendation regarding demurrage.

Ratio Decidendi: Where import is made under a licence carrying a specific user condition that is found incapable of fulfilment, the goods remain liable to confiscation, but a financing bank acting bona fide on the basis of the licensing endorsement should not be burdened with redemption fine absent mala fides.

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