By TIOL News Service

MUMBAI, MAY14, 2013: THE rebate claims of the Petitions filed under Rule 18 of the Central Excise Rules, 2002 were rejected by the rebate sanctioning authority on the ground that they had failed to submit the original and duplicate copies of the ARE-1 forms.

The revisional authority has also held that the submission of the original and duplicate of the ARE-1 forms duly endorsed by the customs authorities establishes the export of duty paid goods and is an essential requirement and upheld the rejection of rebate.

The revisional authority held that whereas under Chapter 7 of the Manual which relates to export under bond without the payment of duty provision has been made for accepting proof of export on the basis of collateral documentary evidence if the original and duplicate copies of ARE-1 are lost, in the case of export on the payment of duty under a rebate claim, no such provision is contained in Chapter 8 of the CBEC's Manual of Supplementary Instructions

The contention of the Petitioner was that the original and duplicate copies of the ARE-1 forms were lost by their CHA and the Petitioner had lodged an FIR. They submitted that sufficient documentary evidence has been produced consisting of (a) the bill of lading; (b) the mate's receipt: (c) bank receipt of the State Bank of India showing the realization of the export proceeds and (d) an endorsement of the customs authorities on the triplicate copy of the ARE- 1 form which would establish that the goods were exported and had a duty paid character;

In order to qualify for the grant of a rebate under Rule 18, the mandatory conditions which are required to be fulfilled are that (a) the goods have been exported; and (b) duty had been paid on the goods. The production of the ARE-1 form in the original and duplicate is a matter of procedure and where the exporter contends that the ARE-1 form has been lost or misplaced, that should not result in the deprivation of the statutory right to claim a rebate subject to the satisfaction of the authority on the production of sufficient documentary material that would establish the identity of the goods exported and the duty paid character of the goods.

After hearing rival contentions, the High Court held:

The procedure which has been laid down in the notification dated 6 September 2004 and in CBEC's Manual of Supplementary Instructions of 2005 is to facilitate the processing of an application for rebate and to enable the authority to be duly satisfied that the two fold requirement of the goods having been exported and of the goods bearing a duty paid character is fulfilled. The procedure cannot be raised to the level of a mandatory requirement. Rule 18 itself makes a distinction between conditions and limitations on the one hand subject to which a rebate can be granted and the procedure governing the grant of a rebate on the other hand. While the conditions and limitations for the grant of rebate are mandatory, matters of procedure are directory.

A distinction between those regulatory provisions which are of a substantive character and those which are merely procedural or technical has been made in a judgment of the Supreme Court in ( 2002-TIOL-234-SC-CX ). The Supreme Court held that the mere fact that a provision is contained in a statutory instruction “does not matter one way or the other”. The Supreme Court held that non-compliance of a condition which is substantive and fundamental to the policy underlying the grant of an exemption would result in an invalidation of the claim. On the other hand, other requirements may merely belong to the area of procedure and it would be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes which they were intended to serve.

Accordingly, the High Court directed the rebate sanctioning authority to process the rebate claim without insisting on the original and duplicate ARE1s if it is otherwise satisfied that the conditions for the grant of rebate have been fulfilled. However, with regard to one rebate claim, the High Court upheld the rejection of rebate as the goods came to be exported and the vessel had sailed on 18 April 2008 even before a Let Export Order was passed by the customs authorities. The primary requirement of the identity of the goods exported was not fulfilled and hence rebate is not admissible.

(See 2013-TIOL-386-HC-MUM-CX)