Bona fide transferee of import licence may claim customs exemption where cancellation is unproven and no suppression is shown.

A transferee of a transferable import licence who acquires it bona fide for value and without notice of cancellation or defect may rely on the licence for exemption under Notification No. 117/94-Cus. The majority treated original licences bearing no cancellation on their face, and purchased through brokers in the market, as effective against the buyer where the Revenue's cancellation case rested mainly on an untested departmental letter without proper corroboration. In the absence of suppression, wilful misstatement or collusion, the extended period under the Customs Act could not be invoked, and the duty demand, confiscation, redemption fine and penalties also failed. The dissent considered the transactions fraudulent and would have sustained the demand and penalties.

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Issues: (i) whether the Special Import Licences were valid for import and whether the appellants could claim the exemption under Notification No. 117/94-Cus. on the strength of those licences; (ii) whether duty demand, confiscation, redemption fine and penalties could be sustained, including invocation of the extended period under the Customs Act.

Issue (i): whether the Special Import Licences were valid for import and whether the appellants could claim the exemption under Notification No. 117/94-Cus. on the strength of those licences.

Analysis: The majority found that the licences were produced in original, bore no endorsement of cancellation or defacement on their face, and had been purchased in the market for consideration through brokers. The cancellation relied upon by the Revenue rested mainly on an untested departmental letter and was not supported by the prescribed manner of cancellation or by effective corroboration. The majority treated the appellants as bona fide purchasers for value and held that, on the apparent tenor of the instruments and the surrounding market practice, the licences could not be treated as invalid against them.

Conclusion: This issue was answered in favour of the assessee. The exemption could not be denied on the ground that the licences were cancelled or defaced.

Issue (ii): whether duty demand, confiscation, redemption fine and penalties could be sustained, including invocation of the extended period under the Customs Act.

Analysis: The majority held that there was no material to show suppression, wilful misstatement or collusion by the appellants, and therefore the extended period of limitation could not be invoked. Since the licences were treated as effective for the imports, the demand of duty and the consequential confiscation and penalties also failed. The majority further concluded that the redemption fine could not be sustained in the circumstances.

Conclusion: This issue was answered in favour of the assessee. The duty demand, confiscation, redemption fine and penalties were set aside.

Final Conclusion: The majority held that the imports were covered by usable licences acquired bona fide for value, and that the consequential demand and penal action could not stand.

Dissenting Opinion: The Member (Technical) held that the transactions were fraudulent, the licences were not bona fide acquisitions, the duty demand and penalties were justified, and only the redemption fine was not sustainable because the goods were not available for confiscation.

Ratio Decidendi: A transferee who acquires a transferable import licence for value without notice of any cancellation or defect, and where the licence bears no cancellation on its face, cannot be denied the exemption merely on the basis of an uncorroborated departmental assertion of cancellation; in the absence of suppression or wilful misstatement by such transferee, the extended period and consequential penalties cannot be invoked.

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