Transferable duty credit scrips validity and bonafide transferee entitlement to duty exemption upheld where scrips valid at import.

Transferable duty credit scrips and licences validly issued and subsisting on the date of import confer duty-exemption rights on a bona fide transferee, even if the original licence holder obtained them by fraud; forged or non-issued scrips have no legal existence and cannot support exemption. The licensing authority's prior recognition and subjective verification of the exporter are relevant to validity. Applied precedent confirms these principles and the adjudged duty demands were set aside, resulting in allowance of the appeals in favour of the appellants.

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Issues: Whether goods imported by a bona fide transferee against freely transferable duty-credit scrips/licenses that were valid and subsisting at the time of import can be denied duty-exemption or subjected to confiscation and penalty on the ground that the original licence-holder had obtained the scrips/licenses by fraud.

Analysis: The legal framework comprises transferable export incentive scrips/licenses issued by the competent licensing authority and the distinction between documents that are forged or never issued and documents which, though procured by fraud by the original holder, were validly issued and subsisting at the time of importation. Where the licensing authority issued a licence/scrip and it was presented at the time of import and filing of the bill of entry, the licence/scrip conferred the entitlement to duty-exemption during its period of validity even if the original licence-holder had committed fraud in obtaining it. The entitlement of a purchaser-transferee who acquired the scrip for valuable consideration and without notice of fraud is protected. By contrast, documents that were forged or not issued by the licensing authority have no legal existence and do not confer any entitlement on either the original holder or any transferee.

Conclusion: The entitlement to duty-exemption is available to bona fide transferees who imported goods on the basis of scrips/licenses that were valid and subsisting at the time of import; therefore confiscation and penalties imposed on that basis are not sustainable. The appeals are allowed in favour of the appellants.

Ratio Decidendi: A licence/scrip validly issued by the competent authority and presented at the time of importation protects a bona fide transferee's entitlement to duty-exemption even if the original licence-holder obtained the scrip by fraud; only forged or non-issued documents are void ab initio and incapable of conferring exemption.

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