REP licence actual-use condition binds transferees; Neutral Malt Spirit could not be imported without nexus to the export product.

Under the REP licence scheme, imports were permitted only where the goods had a nexus with the export product and were actually used in its manufacture. The Bombay HC held that the licence's own declaration and Appendix 17 conditions were restrictive, so the broader reasoning in Bussa Overseas did not apply on these facts; SVA Udyog was the correct authority because it directly reflected the policy conditions. The Court also held that a transferee of an REP licence takes it subject to the same attached conditions and cannot claim a better right than the transferor. Neutral Malt Spirit could not be imported as "Ethyl Alcohol" absent the required nexus, so the import was impermissible.

---

---

Issues: (i) Whether the direct decision in Bussa Overseas prevailed over the later decision in SVA Udyog for imports under the REP licence scheme. (ii) Whether a transferee of an REP licence was free from the actual user condition and could import Neutral Malt Spirit under the description "Ethyl Alcohol".

Issue (i): Whether the direct decision in Bussa Overseas prevailed over the later decision in SVA Udyog for imports under the REP licence scheme.

Analysis: The relevant REP licence was not issued in the abstract. Appendix 17, read with the General Conditions, required the imported materials to have nexus with the export product and to be actually used in its manufacture. The licence itself carried a declaration that the listed items were actually used as raw material and components in the manufacture of the exported product. Bussa Overseas turned on a licence that used the generic expression "Ethyl Alcohol" simpliciter without restricting its scope, whereas the present licence contained the actual-use declaration and was governed by the restrictive scheme in Appendix 17. On that footing, the later decision in SVA Udyog, which directly applied the policy conditions, was held to be the apt authority.

Conclusion: Bussa Overseas did not govern the present facts and the Tribunal was in preferring SVA Udyog; the answer is against the assessee and in favour of the Revenue.

Issue (ii): Whether a transferee of an REP licence was free from the actual user condition and could import Neutral Malt Spirit under the description "Ethyl Alcohol".

Analysis: Clause 226 of the Exim Policy made the REP licence subject to the ordinary law, and the ordinary rule is that a transferee takes the licence with its attached conditions and cannot claim a better right than the transferor. The policy provisions in Clauses 188, 189(1), 193(1) and 195(1), together with Paragraph 8 of the General Conditions in Appendix 17, required the imported item to be actually used in the manufacture of the exported product. Neutral Malt Spirit was not shown to be usable in the manufacture of dyes or dye intermediates, and therefore could not satisfy the nexus requirement merely because it may fall within a broad chemical description.

Conclusion: The transferee remained bound by the actual user condition, and the import of Neutral Malt Spirit under the REP licence was not permissible; the issue is against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the REP licence conditions required actual use and nexus with the exported product, and the transferee could not enlarge the licence beyond those conditions.

Ratio Decidendi: Where the REP licence scheme and the licence itself require actual use of the imported material in the manufacture of the exported product, a transferee cannot import goods outside that nexus merely because they fall within a broad generic description in the licence.

---