2018 (12) TMI 166 - HC - Central Excise

Refund/rebate of duty paid on goods exported - rejection of rebate claim on the ground of non submission of ARE-1 application - stand taken by the counsel for Revenue is that the requirement of production of original copy of ARE-1 is a mandatory requirement to establish that the goods have suffered duty at the time of removal from the factory of manufacture and further that they are actually exported - whether the requirement of submission of ARE -1 form is mandatory or mere directory? Held that - The provisions of taxing statute are required to be strictly construed. Further where a taxing statute provides for certain exemptions or rebates subject to certain conditions, those preconditions, fulfillment of which entitles a person to rebate or exemption from taxes or duty are also mandatory. However, in appropriate cases, a play may be allowed, in so far as the procedure through which the required conditions are to be fulfilled to claim rebate/exemption. In the present case, on the face of Rule 18, which specifies precondition for grant of rebate, it should also be held to be mandatory - If the Rule itself requires the fulfillment of precondition for grant of rebate, it would amount to doing violence to the plain language of the statute to hold otherwise that fulfillment of requirements would not be a mandatory precondition. Ordinarily, the requirements of fulfillment of preconditions as stated in Rule 18 read with relevant notification, as mandated are required to be fulfilled to avail rebate. However, in exceptional cases it is open for the assessee to prove claim of rebate by leading other collateral documentary evidence in support of entitlement of rebate - where an assessee seeks to establish claim for rebate without ARE-1 document or for that matter without submission of those documents which are specified in relevant notifications he is required to clearly state as to what was that reason beyond his control due to which he could not obtain ARE-1 document. The submission of ARE-1 document was essential requirement and it cannot be condoned. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the requirement of submission of ARE-1 form is mandatory or directory for claiming rebate under Rule 18 of the Central Excise Rules, 2002.
2. Whether the rejection of the rebate claim by the authorities due to non-submission of ARE-1 form was justified.

Issue-wise Detailed Analysis:

1. Mandatory vs. Directory Requirement of ARE-1 Form:
The central question was whether the submission of ARE-1 form is a mandatory requirement or merely procedural for claiming a rebate under Rule 18 of the Central Excise Rules, 2002. The appellant argued that the requirement of ARE-1 is procedural and not substantive, relying on the Supreme Court's decision in Commissioner of Customs (Preventive) Mumbai Vs. M. Ambalal & Company, which suggested that procedural requirements should not impede the substantive right to rebate. Conversely, the Revenue contended that the submission of ARE-1 is a mandatory requirement to establish that the goods have suffered duty at the time of removal from the factory and were actually exported.

The court analyzed Rule 18 and the notification dated 06.09.04, which specifies the conditions and procedures for claiming a rebate. The court emphasized that the rebate is subject to fulfilling the conditions and procedures specified in the notification, which includes the submission of ARE-1. The court noted that the purpose of ARE-1 is to provide authentic certification by excise and customs authorities regarding the duty-paid status and export of goods, ensuring the efficiency of the administrative process and preventing fraudulent claims.

The court concluded that the requirement of ARE-1 is substantive and mandatory. However, it acknowledged that in exceptional cases, where the assessee could not submit ARE-1 due to reasons beyond their control, they might be allowed to provide other collateral documentary evidence. This exception is not a choice but a necessity to be proven by the assessee.

2. Justification of Rejection of Rebate Claim:
The appellant's rebate claim was rejected by the authorities due to non-submission of ARE-1 and other reliable evidence of duty-paid export. The appellant argued that the authorities should have considered other collateral evidence provided, such as invoices, shipping bills, bills of lading, bank realization certificates, and disclaimer certificates.

The court examined whether the authorities had considered the other evidence submitted by the appellant. It found that the authorities had indeed scrutinized the collateral evidence but found them insufficient. The authorities noted discrepancies, such as the shipping bills being filed under the DEPB Scheme and the commercial invoices not being issued under Rule 11 of the Central Excise Rules, 2002. The bank realization certificates did not correlate with the exported goods for which the rebate was claimed.

The court upheld the authorities' decision, stating that the appellant failed to meet the mandatory requirement of submitting ARE-1 and did not provide satisfactory collateral evidence to support the rebate claim. The court reiterated that while procedural flexibility might be allowed in exceptional cases, the appellant did not demonstrate any compelling reason for the non-submission of ARE-1.

Conclusion:
The court dismissed the appeal, affirming that the submission of ARE-1 is a mandatory requirement for claiming a rebate under Rule 18 of the Central Excise Rules, 2002. The authorities' rejection of the rebate claim was justified due to the appellant's failure to provide the required ARE-1 form and insufficient collateral evidence. The judgment underscores the importance of adhering to procedural requirements in tax rebate claims while allowing limited flexibility in exceptional circumstances.