Oral Judgment: (Dr. D.Y. Chandrachud, J.)
Rule, by consent made returnable forthwith. The learned counsel appearing on behalf of the Respondents waives service on behalf of the Respondents. By consent, the Petitions are taken up for hearing and final disposal.
2. In both the Petitions which form the subject matter of the proceedings, the Petitioner has questioned the legality and validity of an order passed by the Joint Secretary to the Government of India on 24 May 2012 dismissing the revision applications filed by the Petitioner from orders of the appellate authority confirming the rejection of rebate claims.
3. The Petitioner engages in the manufacture of Polyethylene Insulated Jelly filled Copper Cables and Optical Fiber Cables used in telecommunication falling under tariff heading 85.44 of the Central Excise Tariff. The Petitioner has a factory at Silvassa which is registered under the Central Excise Rules with the Central Excise Division- III, Silvassa falling under the Vapi Commissionerate. The Petitioner sells goods both in the domestic market and for export. The dispute in the present case relates to claims for rebate filed by the Petitioner under Rule 18 of the Central Excise Rules 2002. Rule 18 provides as follows:
âRULE 18. Rebate of duty. - Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.â
4. In exercise of the powers conferred by Rule 18, the Union Government in the Ministry of Finance has issued a notification dated 6 September 2004 bearing notification 19/2004-C.E.(N.T.). The Notification specifies the conditions and limitations on the one hand and the procedures subject to which a rebate shall be granted of the whole of the duty paid on excisable goods falling under the First Schedule of the Central Excise Tariff Act 1985 which are exported to any country other than Nepal and Bhutan. The Central Board of Excise and Customs in the Excise Manual of Supplementary Instructions of 2005 has catalogued in Chapter 8 the procedure governing the sanctioning of a claim for rebate of central excise duty.
5. Under the statutory notification dated 6 September 2004 manufacturer-exporters registered under the Central Excise Rules 2002 and merchant-exporters who procure and export goods directly from the factory or warehouse can exercise the option of exporting the goods sealed at the place of dispatch by a Central Excise Officer or under a procedure of self-sealing. Under the procedure that is prescribed by the notification, for the purpose of sealing of goods intended for export, at the place of dispatch, the exporter has to present the goods along with four copies of an application in form ARE-I specified in the annexure to the notification, to the Superintendent of Central Excise having jurisdiction over the factory of production or manufacture or the warehouse. The Superintendent or Inspector of Central Excise has to verify the identity of the goods mentioned in the application and the particulars of the duty paid or payable, and if this is found in order, he has to seal each package or the container and endorse each copy of the application in token of having conducted the examination. The original and duplicate copies of the application are returned to the exporter by the Superintendent of Central Excuse. The triplicate copy is sent to the officer with whom a rebate claim is to be filed, either by post or by handing over to the exporter in a tamper proof sealed cover after posting the particulars in the official records. On the arrival of the goods at the place of export, the goods have to be presented together with the original and duplicate copies of the application (the quadruplicate copy being optional) to the Commissioner of Customs or a duly appointed officer. The Commissioner of Customs or his officer examines the consignment with the particulars cited in the application and upon finding them to be correct and exportable in accordance with the law for the time being in force, he is required to allow the export of the goods and to certify on the copies of the application that the goods have been duly exported, citing the shipping bill number, date and other particulars of export. The exporter has to lodge a claim of rebate of duty paid on all excisable goods along with an original copy of the application to the Assistant or Deputy Commissioner of Central Excise having jurisdiction over the factory of manufacture, warehouse or, as the case may be, the Maritime Commissioner. The rebate sanctioning officer is required to compare the duplicate copy of the application received from the officer of customs with the original copy received from the exporter and with the triplicate copy received from the Central Excise Officer and if he is satisfied that the claim is in order, he has to sanction the rebate either in whole or in part.
6. Paragraph 8 of Chapter 8 of CBEC's Excise Manual of Supplementary Instructions 2005 deals with sanctioning of a claim for rebate by the Central Excise Officer and is as follows:
â8. Sanction of claim for rebate by Central Excise
8.1 The rebate claim can be sanctioned by any of the following officers of Central Excise:-
Deputy / Assistant Commissioner of Central Excise having jurisdiction over the factory of production of export goods or the warehouse; or Maritime Commissioner.
8.2 It shall be essential for the exporter to indicate on the A.R.E. 1 at the time of removal of export goods the office and its complete address with which they intend to file claim of rebate.
8.3 The following documents shall be required for filing claim of rebate:
(i) A request on the letterhead of the exporter containing claim of rebate, A.R.E. 1 numbers and dates, corresponding invoice numbers and dates amount of rebate on each A.R.E. 1 and its calculations,
(ii) original copy of the A.R.E.1,
(iii) invoice issued under rule 11,
(iv) self attested copy of shipping Bill, and
(v) self attested copy of Bill of Lading.
(vi) Disclaimer Certificate (in case where claimant is other than exporter)
8.4 After satisfying himself that the goods cleared for export under the relevant A.R.E.1 applications mentioned in the claim were actually exported, as evident by the original and duplicate copies of A.R.E.1 duly certified by Customs, and that the goods are of 'duty-paid' character as certified on the triplicate copy of A.R.E.1 received from the jurisdictional Superintendent of Central Excise (Range Office), the rebate sanctioning authority will sanction the rebate, in part or full. In case of any reduction or rejection of the claim, an opportunity shall be provided to the exporter to explain the case and a reasoned order shall be issued.
8.5 Where the individual rebate claim exceeds Rs.5 lakh, they shall be pre-audited before these are disbursed.â
7. The first petition before the Court arises from an order of adjudication of the Assistant Commissioner dated 29 January 2010 rejecting two claims for rebate dated 20 March 2009 and 8 April 2009 in the amount or a total value of Rs.12,54,214/-. The second petition before the Court relates to the rejection of three claims for rebate dated 20 March 2009 in the amount of Rs.42,97,781/- in respect of which an order of adjudication was passed on 13 November 2009. Both the orders of adjudication were confirmed in appeal by the Commissioner (Appeals) and in revision by the revisional authority. The common ground on the basis of which the rebate claims have been rejected is that the Petitioner had failed to submit the original and duplicate copies of the ARE-1 forms. The revisional authority has 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 therefore an essential requirement. 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. Since the CBEC has according to the revisional authority not relaxed the condition of submitting the original and duplicate copies of ARE-1 forms, along with the rebate claim in any exigency, the requirement could not be dispensed with and in the absence of the original and duplicate copies of the ARE-1 forms, the rebate claims could not be sanctioned.
8. 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. The submission of the Petitioner is that:
(i) 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;
(ii) 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;
(iii) As a matter of fact, in several decisions of the Union Government in the revisional jurisdiction as well as in the decisions of the CESTAT, the production of the relevant forms has been held to be a procedural requirement and hence directory as a result of which, the mere non-production of such a form would not result in an invalidation of a claim for rebate where the exporter is able to satisfy through the production of cogent documentary evidence that the relevant requirements for the grant of rebate have been fulfilled;
(iv) In the present case, no doubt has been expressed whatsoever that the goods were exported goods.
9. On the other hand it has been urged on behalf of the Revenue that:
(i) The procedure which has been specified in the notification dated 6 September 2004 which has been issued under Rule 18 spells out the manner in which a verification is to be conducted in regard to the proof of export and the duty paid character of the goods;
(ii) The production of an ARE-1 form in original and in duplicate must be construed as being mandatory since that is the basic condition to establish that the goods were exported and that they had a duty paid character;
(iii) In respect of one of the two consignments in the first writ petition (relating to the rebate claim dated 8 April 2009 in the amount of Rs.10.08 lacs), the goods were loaded by the Shipping Line on the vessel and the vessel sailed on 18 April 2008 whereas the Let Export Order was made by the customs authorities on 19 April 2008. In these circumstances, it is apparent that there was no due verification by the customs authorities of the fact that the goods had been exported or in regard to their identity and hence, the rejection of the rebate claim is lawful and valid for an additional reason pertaining to the aforesaid consignment.
The rival contentions now fall for consideration.
10. Rule 18 of the Central Excise Rules 2002 empowers the Central Government by a notification to grant a rebate of duty paid on excisable goods or on materials used in the manufacture or processing of such goods, where the goods are exported. The rebate under Rule 18 shall be subject to such conditions or limitations, if any, and the fulfillment of such procedure as may be specified in the notification. Rule 18, it must be noted at the outset, makes a clear distinction between matters which govern the conditions or limitations subject to which a rebate can be granted on the one hand and the fulfillment of such procedure as may be prescribed on the other hand. The notification dated 6 September 2004 that has been issued by the Central Government under Rule 18 prescribes the conditions and limitations for the grant of a rebate and matters of procedure separately. Some of the conditions and limitations are that the excisable goods shall be exported after the payment of duty directly from a factory or warehouse, except as otherwise permitted by the CBEC; that the excisable goods shall be exported within six months from the date on which they were cleared for export from the factory of manufacture or warehouse or within such extended period as may be allowed by the Commissioner; that the market price of the excisable goods at the time of export is not less than the amount of rebate of duty claimed and that no rebate on duty paid on excisable goods shall be granted where the export of the goods is prohibited under any law for the time being in force. The procedure governing the grant of rebate of central excise duty is specified in the same notification dated 6 September 2004 separately. Broadly speaking the procedure envisages that the exporter has to present four copies of an application in form ARE-1 to the Superintendent of Central Excise. The Superintendent has to verify the identify of the goods and the particulars of the duty paid and after sealing the packet or container, he is required to return the original and duplicate copies of the application to the exporter. The triplicate copy is to be sent to the officer with whom a rebate claim is to be filed either by post or by handing it over to the exporter in a tamper proof sealed cover. After the goods arrive at the place of export, they are presented together with the original and duplicate copies of the application to the Commissioner of Customs. The Commissioner of Customs after examining the consignment with the particulars cited in the application is to allow the export if he finds that the particulars are correct and to certify on the copies of the application that the goods have been duly exported. The claim for rebate of duty is presented to the Assistant or Deputy Commissioner of Central Excise who has to compare the duplicate copy of the application received from the officer of customs with the original copy received from the exporter and the triplicate received from the central excise officer.
11. The Manual of Instructions that has been issued by the CBEC specifies the documents which are required for filing a claim for rebate. Among them is the original copy of the ARE-1, the invoice and self attested copies of the shipping bill and the bill of lading. Paragraph 8.4 specifies that the rebate sanctioning authority has to satisfy himself in respect of essentially two requirements. The first requirement is that the goods cleared for export under the relevant ARE-1 applications were actually exported as evident from the original and duplicate copies of the ARE-1 form duly certified by customs. The second is that the goods are of a duty paid character as certified on the triplicate copy of the ARE-1 form received from the jurisdictional Superintendent of Central Excise. The object and purpose underlying the procedure which has been specified is to enable the authority to duly satisfy itself that the rebate of central excise duty is sought to be claimed in respect of goods which were exported and that the goods which were exported were of a duty paid character.
12. 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.
13. 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 Mangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner (1991(55) E.L.T. 437 (S.C.). The Supreme Court held that the mere fact that a provision is contained in a statutory instruction âdoes not matter one way or the otherâ. 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 (at paragraph 11). The Supreme Court held as follows:
âThe mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some other may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve.â
14. The particulars which are contained in Form ARE-1 relate to the manufacturer of the goods, the number and description of the packages, the weight, marks and quantity of the goods and the description of the goods. Similarly, details are provided in regard to the value, duty, the number and date of invoice and the amount of rebate claimed. Part A contains a certification by the central excise officer to the effect inter alia that duty has been paid on the goods and that the goods have been examined. Part B contains a certification by the officer of the customs of the shipment of the goods under his supervision.
15. In the situation in the two writ petitions, the rebate claims that were filed by the Petitioner would have to be duly bifurcated. As noted earlier the first writ petition (Writ Petition 3102 of 2013)relates to two claims dated 20 March 2009 and 8 April 2009 in the total value of Rs.12.54 lacs. In respect of the second of those claims dated 8 April 2009, of a value of Rs.10.08 lacs, the Petitioner has averred that the goods were loaded by the Shipping Line on the vessel and the vessel sailed on 18 April 2008 whereas the Let Export Order was passed by the customs authorities on 19 April 2008. The Petitioner has stated that in view of this position the customs authorities withheld the endorsement of the ARE-1 forms and the issuance of the export promotion copy of the shipping bill (paragraphs 8(g) and 8(h) of the petition). We find merit in the contention of counsel appearing on behalf of the Revenue that in these circumstances, the rejection of the rebate claim dated 8 April 2009 by the adjudicating authority and which was confirmed in appeal and in revision cannot be faulted. Admittedly even accordingly to the Petitioner 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 therefore, in our view, not fulfilled. In such a case, it cannot be said that a fundamental requirement regarding the export of the goods and of the duty paid character of the goods was satisfied.
16. However, it is evident from the record that the second claim dated 20 March 2009 in the amount of Rs.2.45 lacs which forms the subject matter of the first writ petition and the three claims dated 20 March 2009 in the total amount of Rs.42.97 lacs which form the subject matter of the second writ petition were rejected only on the ground that the Petitioner had not produced the original and the duplicate copy of the ARE-1 form. For the reasons that we have indicated earlier, we hold that the mere non-production of the ARE-1 form would not ipso facto result in the invalidation of the rebate claim. In such a case, it is open to the exporter to demonstrate by the production of cogent evidence to the satisfaction of the rebate sanctioning authority that the requirements of Rule 18 of the Central Excise Rules 2002 read together with the notification dated 6 September 2004 have been fulfilled. As we have noted, the primary requirements which have to be established by the exporter are that the claim for rebate relates to goods which were exported and that the goods which were exported were of a duty paid character. We may also note at this stage that the attention of the Court has been drawn to an order dated 23 December 2010 passed by the revisional authority in the case of the Petitioner itself by which the non-production of the ARE-1 form was not regarded as invalidating the rebate claim and the proceedings were remitted back to the adjudicating authority to decide the case afresh after allowing to the Petitioner an opportunity to produce documents to prove the export of duty paid goods in accordance with the provisions of Rule 18 read with notification dated 6 September 2004 (Order No.1754/10-CX dated 20 December 2010 of D.P. Singh, Joint Secretary, Government of India under Section 35 EE of the Central Excise Act 1944). Counsel appearing on behalf of the Petitioner has also placed on the record other orders passed by the revisional authority of the Government of India taking a similar view (GargTex-O-Fab Pvt. Ltd. - 2011 (271) E.L.T. 449 Hebenkraft â 2001 (136) E.L.T. 979). The CESTAT has also taken the same view in its decisions in ShreejiColour Chem Industries v. Commissioner of Central Excise (2009(233) E.L.T. 367), Model Buckets and Attachments (P) Ltd. v. Commissioner of Central Excise (2007(217) E.L.T. 264)and Commissioner of Central Excise v. TISCO (2003(156) E.L.T. 777).
17. We may only note that in the present case the Petitioner has inter alia relied upon the bills of lading, banker's certificate in regard to the inward remittance of export proceeds and the certification by the customs authorities on the triplicate copy of the ARE-1 form. We direct that the rebate sanctioning authority shall reconsider the claim for rebate on the basis of the documents which have been submitted by the Petitioner. We clarify that we have not dealt with the authenticity or the sufficiency of the documents on the basis of which the claim for rebate has been filed and the adjudicating authority shall reconsider the claim on the basis of those documents after satisfying itself in regard to the authenticity of those documents. However, the rebate sanctioning authority shall not upon remand reject the claim on the ground of the non-production of the original and the duplicate copies of the ARE-1 forms, if it is otherwise satisfied that the conditions for the grant of rebate have been fulfilled. For the aforesaid reasons, we allow the Petitions by quashing and setting aside the impugned order of the revisional authority dated 22 May 2012 and remand the proceedings back to the adjudicating authority for a fresh consideration. The rejection of the rebate claim dated 8 April 2009 in the first writ petition is, however, for the reasons indicated earlier confirmed. Rule is made absolute in the aforesaid terms.
There shall be no order as to costs.