Transferee DEPB scrips remain valid for exemption when genuinely issued and subsisting, despite later cancellation for original fraud.

A transferee importer cannot be denied DEPB exemption merely because the original holder obtained the scrip through fraudulent documents, where the scrip was validly issued by the licensing authority and was subsisting when used for import. The decisive distinction is between a later-cancelled but genuine licence and a document that was forged or never issued at all. As the impugned scrips were not shown to be non-existent or forged, the demand, denial of exemption, and consequent liability were unsustainable. The benefit remained available to the importer on the facts stated.

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Issues: Whether duty exemption under the transferred DEPB scrips could be denied to the importer merely because the scrips were later cancelled after having been obtained by the original holder on the basis of fraudulent documents.

Analysis: The scrips purchased by the appellant were admittedly issued by the DGFT and were in force when used for import. The decisive distinction was between a validly issued licence or scrip that was later cancelled, and a document that was never issued or was forged ab initio. On the facts, the impugned scrips were not found to be non-existent or forged, and therefore the transferee importer could not be denied the benefit solely because the original procurement involved fraud. The earlier departmental reliance on a case concerning non-genuine scrips was held inapplicable because that category stands on a different footing.

Conclusion: The appellant remained entitled to the DEPB benefit, and the demand, denial of exemption, and consequential liability could not be sustained.

Ratio Decidendi: Where a licence or DEPB scrip has been validly issued by the licensing authority and is subsisting at the time of import, its subsequent cancellation does not defeat exemption for a transferee importer merely because the original holder obtained it through fraudulent documents, unless the document itself was forged or never issued.

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