2026 (2) TMI 443 - AT - Customs

Validity of duty free scrips at import: valid scrips later cancelled for misrepresentation must be honoured; forged scrips permit confiscation.

Validity of duty free licences and scrips turns on their status at the time of import: where a DGFT issued scrip was valid at import but later cancelled ... Validity of licence/scrip at the time of import - Duty Free Replenishment Scheme (DRFC) and Duty Free Imports Authorisation Scheme (DFIAS) misused by over-invoicing of export goods - fraud vitiates everything - honour of licences not cancelled by the licensing authority - confiscation where import made on forged licence - invocation of extended period of limitation in cases of forged scrips - HELD THAT:- We find that this is a case where a scrip validly issued by DGFT authorities were found to have been obtained by misstatement or misrepresentation etc by the original exporter M/s. Shree Kuberappa & Sons. We find that a similar legal issue was examined by a Coordinate Bench of this Tribunal in its order pertaining to The India Cements Ltd. Vs Commissioner of Customs, Chennai [2025 (8) TMI 1158 - CESTAT CHENNAI] Hence the action that lies when a scrip/licence has been issued by DGFT but was obtained by misrepresentation is not the same as in the case of a fraudulent scrip/licence. Since the import in this case was made under a licence which was valid at the time of import and was cancelled by DGFT much later, the said licence are required to be honoured by the Custom authorities and no demand can be raised. In the circumstances interest, penalties etc do not survive. Thus, we set aside the impugned order and allow the appeal. The appellant is eligible for consequential relief as per law. The appeal is disposed of accordingly. Issues: Whether imports made under licences/scrips issued by the licensing authority but subsequently found to have been obtained by misrepresentation by the original licence-holder can be subjected to duty, interest, penalty and confiscation when the licences remained valid at the time of import and were cancelled only later.Analysis: The question distinguishes licences that are forged or never legitimately issued from licences validly issued but allegedly obtained by misrepresentation. For forged or fake licences the licence is non-existent and imports effected thereunder are unlawful, attracting confiscation and penalties. By contrast, where a licence was legitimately issued and remained valid at the time of import but was obtained by misrepresentation by the original licence-holder, the licence is voidable and the appropriate remedy lies with the licensing authority; until cancellation or suspension by that authority the licence must be treated as valid. Established authorities hold that innocent transferee-importers who imported under licences valid at the time of import are entitled to have those licences honoured by Customs and cannot be subjected to demands, interest or penalties arising from post-import cancellation by the licensing authority.Conclusion: The appellant is entitled to relief because the imports were made under licences that were valid at the time of import; the post-import cancellation by the licensing authority does not render the licences void ab initio and therefore duty, interest, penalty and confiscation do not survive against the importer.