Customs duty on transferee of validly issued licence and reliance on section 108 statements both fail without statutory safeguards.

A transferee of a licence issued by the competent authority cannot be saddled with customs duty merely because the original holder procured it through forged documents, unless the transferee is shown to be complicit or lacking bona fides. The text distinguishes a genuinely issued licence obtained by fraud from a licence that was never validly issued, and treats later cancellation as non-retrospective. It also states that statements recorded under section 108 of the Customs Act cannot be used as substantive evidence in adjudication unless the safeguards under section 138B are complied with, including examination of the maker and related evidentiary protections. On that basis, the demand, penalty and related confirmation could not survive.

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Issues: (i) Whether customs duty could be fastened on the transferee of licences when the licences were issued by the competent authority but had been obtained by the original holders on the basis of forged documents; (ii) Whether statements recorded under section 108 of the Customs Act could be relied upon in adjudication without following the procedure under section 138B of the Customs Act.

Issue (i): Whether customs duty could be fastened on the transferee of licences when the licences were issued by the competent authority but had been obtained by the original holders on the basis of forged documents.

Analysis: The governing principle applied was that a licence which has actually been issued by the competent authority remains a valid licence until it is avoided in the manner known to law, and its later cancellation does not retrospectively render imports illegal. The distinction is between a licence that is genuine but procured by fraud and a licence that is itself forged or never issued. Where the transferee purchases and uses a licence that was issued by the licensing authority, duty liability cannot be imposed merely because the original holder had used forged documents to obtain it, absent proof that the transferee was party to the fraud or lacked bona fides.

Conclusion: The issue was decided in favour of the assessee. Duty could not be recovered from the appellant on the basis that the licences were issued, not forged.

Issue (ii): Whether statements recorded under section 108 of the Customs Act could be relied upon in adjudication without following the procedure under section 138B of the Customs Act.

Analysis: Statements recorded during inquiry become relevant for proving their contents only when the statutory procedure for admissibility is followed. The mandatory requirement is examination of the maker as a witness before the adjudicating authority and compliance with the safeguards that permit reliance on such statements, including the opportunity for cross-examination where applicable. In the absence of compliance with this procedure, statements recorded under section 108 cannot be treated as substantive evidence against the noticee.

Conclusion: The issue was decided in favour of the assessee. The statements under section 108 could not be relied upon for want of compliance with section 138B.

Final Conclusion: The demand and penalty confirmation could not survive, and the impugned order was set aside with consequential relief.

Ratio Decidendi: A transferee cannot be denied customs exemption or saddled with duty merely because the original holder procured a genuinely issued licence by fraud, unless the transferee is shown to be complicit, and statements recorded under section 108 of the Customs Act are inadmissible unless the statutory safeguards in section 138B are satisfied.

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