Transferable DFIA licence validity protects bona fide transferee-importers where exporter allegations remain unproved and licences are not cancelled.

Transferable DFIA licences remained valid because allegations against the exporter were unestablished, the demand against that exporter was dropped, and the licences were not cancelled. A bona fide transferee-importer could therefore not be treated as having used fraudulent or irregular licences. The customs duty demand lacked a substantiated substantive charge, and the extended limitation period could not be invoked. The demand and extended-period invocation were unsustainable.

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Issues: Whether customs duty demand against an importer using transferable DFIA licences was sustainable on merits and under the extended limitation period.

Analysis: The allegations concerning the exporter, whose transferable DFIA licences were used for the imports, had not been established; the demand against that exporter had been dropped and the licences had not been cancelled. A bona fide transferee-importer could not consequently be regarded as having used a fraudulent or irregular licence. Since the substantive charge was unproved, invocation of the extended period was also without justification.

Conclusion: The duty demand and its invocation through the extended limitation period were unsustainable, in favour of the assessee.

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