2026 (2) TMI 342 - AT - Customs

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, ... Validity of transferable duty credit scrips and licences issued by licensing authority - duty credit/exemption against such scrips/licenses - bonafide transferee entitlement to duty exemption where scrips were valid at time of import - void ab initio versus voidable character of licences/scrips obtained by fraud - forged or non-issued scrips having no legal existence - confiscation and penalty - Whether, the goods imported by the appellants, as the Bonafide transferee under freely transferable Duty Credit Scrips/Licenses, which were valid and subsisting on the date of import, would be liable for denial of the benefit of duty exemption in lieu of such scrips, or otherwise, on the ground that the ‘original license holder’ had fraudulently obtained the same? - HELD THAT:- In the case in hand, the appellants had purchased the scrips/licenses from the persons, who were recognized by the licensing authorities as the exporter of the goods and upon subjective verification, the same were issued in their favour by the competent authorities. Thus, under such circumstances, even if the said documents were obtained by the main beneficiary by adopting to the fraudulent means or practices, it cannot be questioned at the stage of the ultimate beneficiary, who had purchased such document duly issued by the competent authority and utilized the same for duty free importation of goods. We find that the issue arising out of the present dispute is no more res integra, in view of the order passed by the Co-ordinate Bench of the Tribunal in the case of Apar Industries Limited Vs. Commissioner of Customs (Export Promotion), Mumbai [2025 (5) TMI 2183 - CESTAT MUMBAI] Upon analysis of the factual matrix involved in the said case, vis-à-vis the legal position. Thus, we do not find any merits in the impugned orders, insofar as the adjudged demands were confirmed against the appellants. Therefore, the impugned orders are set aside and the appeals are allowed in favour of the appellants. 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.