Advance licence conformity for marble imports denied exemption, but confiscation and penalty were set aside for ambiguity.

Imported marble under a transferred advance licence was required to be broadly in conformity with the exported product's physical specifications, including colour, size and thickness. On the facts, off-white marble was not treated as broadly conforming to the earlier pink and green marble exports, so the exemption under Notification No. 80/95-Cus. was unavailable. However, because the expression "relevant" had been the subject of some ambiguity, confiscation and penal consequences were considered unwarranted. The redemption fine and penalty were therefore set aside, even though the exemption claim failed on merits.

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Issues: (i) Whether colour and other physical specifications of marble imported against a transferred advance licence were relevant for determining conformity with the licence and eligibility for exemption under Notification No. 80/95-Cus. dated 31-3-95; (ii) Whether confiscation of the imported goods and penalty were warranted.

Issue (i): Whether colour and other physical specifications of marble imported against a transferred advance licence were relevant for determining conformity with the licence and eligibility for exemption under Notification No. 80/95-Cus. dated 31-3-95.

Analysis: The licence conditions as transferred by the competent authority required import of relevant rough marble slabs capable of being used for manufacture of the export product. The Court held that customs authorities must enforce the licence as issued and cannot ignore the condition of relevance. The DGFT circular also contemplated that imported goods should be broadly in conformity with the exported goods in physical specifications, and in the case of marble this included colour as well as size and thickness. On the admitted facts, off-white marble could not be treated as broadly in conformity with pink and green marble exported earlier.

Conclusion: The imported goods were not in conformity with the advance licence, and the benefit of exemption under Notification No. 80/95-Cus. dated 31-3-95 was not available to the assessee.

Issue (ii): Whether confiscation of the imported goods and penalty were warranted.

Analysis: Although the exemption was denied, the Court accepted that there had been ambiguity and dispute regarding the expression relevant for some time. In that background, confiscation and penal consequences were considered unwarranted.

Conclusion: The redemption fine and penalty were set aside in favour of the assessee.

Final Conclusion: The exemption claim failed on merits, but the penal and confiscatory consequences did not survive.

Ratio Decidendi: Where a transfer of an advance licence incorporates a requirement of relevant goods and the governing policy requires broad conformity with the exported product's physical specifications, customs authorities may deny exemption if the imported goods are not so conforming; however, ambiguity in the regime may justify setting aside confiscation and penalty.

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