Validity of transferred import licences and scrips: forged scrips invalid; fraudulently obtained licences require cancellation to affect transferees.

Validity of transferred import licences and scrips requires distinguishing forged instruments from legitimately issued but fraudulently obtained licences. Forged scrips constitute no licence and are void ab initio, rendering imports under them not lawful; this consequence follows immediately. Licences legitimately issued but procured by fraud are voidable and remain effective in favour of innocent transferees until the competent licensing authority formally cancels them; this determines transferee protection and relief. Reliance on binding Supreme Court precedents informs these principles and dictates setting aside demands based on mere fraudulently obtained but uncancelled licences.

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Issues: Whether import clearances obtained by transferee importers using DFRC/DFIA licences, which were later cancelled ab initio by DGFT on grounds of fraud by the original licence holder, render the transferee liable to pay customs duty, interest and penalties where the licences were valid and not cancelled at the time of import.

Analysis: Applicable legal principles distinguish between licences that are forged and licences obtained by misrepresentation or fraud by the original holder. Authorities establish that a licence obtained by misrepresentation is voidable at the instance of the licensing authority and remains valid until the licensing authority cancels or voids it. Where the licences/scrips were legitimately issued and remained uncancelled at the time of import, transferee importers who acquired and used such licences in good faith are entitled to rely on them for duty exemption. Forged or fabricated licences that were never issued by the licensing authority are outside this principle and do not confer validity. The limitation provisions under Section 28 of the Customs Act are relevant to time-bar issues, but absent allegations of suppression or wrongdoing by the transferee, extended periods for reassessment are not invoked.

Conclusion: The appeals are allowed; where DFRC/DFIA licences were valid and not cancelled at the time of import, the demand for duty, interest and penalties on transferee importers does not survive and the transferees are entitled to consequential relief in their favour.

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