2005 (11) TMI 102 - CGOVT - Central Excise

Rebate claims - Export - duty paid on the inputs viz., Hexane - Notification No. 41/2001-C.E. - HELD THAT - Govt. notes that inspite of above procedural infractions Commissioner (Appeals), has given categorical findings in the impugned Order-in-Appeal that there is sufficient collateral evidences such as RRs, Shipping Bills, Bill of Lading, Bill of export etc., to prove that the respondents have procured Central Excise, duty paid input for manufacturing of the goods exported output of India. Govt. further notes that the original authority has rejected the respondents rebate claim on procedural infraction as evident from personal of perusal of sub para 7.1 above, and in Revision Application also same procedural infractions has been raised. It is not case of the Revenue that the respondents have not procured Central Excise duty paid input for manufacturing of the goods exported out of India Govt., feels that grounds taken by the lower authorities for rejection of the rebate claim is purely of technical nature. Govt., notes that there is catena of judgements of Hon'ble Tribunal/Govt. of India, wherein it is held that substantial benefit of rebate should not be rejected on procedural infractions. The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case, of the latter, substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Govt., has also gone through the Hon'ble Tribunals judgement in case of Synthetics Chemicals Ltd., v. Collector of Central Excise, Allahabad 1997 (1) TMI 271 - CEGAT, NEW DELHI , wherein it is held that a substantive benefit, if otherwise due, could not be denied merely on account of minor procedural infractions. Similarly Hon'ble Supreme Court in case reported in Mangalore Chemicals Fertilizers Ltd. v. Dy. Commissioner 1991 (8) TMI 83 - SUPREME COURT has held that Distinction to be made between procedural condition of technical nature and a substantive condition-Non observation of the Former condonable while that of the latter not condonable as likely to facilitate commission of fraud and introduce administrative inconveniences. Thus, no infirmity in the impugned order and accordingly, upholds the same. The Revision Application, accordingly rejected.

Summary

Issues:
1. Compliance with conditions for rebate claims under Notification No. 41/2001-C.E.
2. Authority of Commissioner to condone procedural lapses in rebate claims.
3. Interpretation of mandatory vs. directory rules in excise laws.

Compliance with conditions for rebate claims under Notification No. 41/2001-C.E.:
The case involved a Revision Application filed against the rejection of rebate claims by a company for duty paid on inputs used in manufacturing products exported to foreign countries. The claims were rejected due to non-compliance with conditions set out in Notification No. 41/2001-C.E., specifically related to registration under Rule 9 of the Central Excise Rules, 2001, filing of declarations, and verification of ratios. The Commissioner contended that compliance with conditions in the notification was mandatory and there was no provision for condonation of non-compliance under Rule 18 of the Central Excise Rules. However, the lower authorities found collateral evidence supporting the procurement of duty-paid inputs for export, leading to a debate on the significance of procedural infractions in rebate claims.

Authority of Commissioner to condone procedural lapses in rebate claims:
The Commissioner argued that the Commissioner (Appeals) erred in condoning procedural lapses as mere procedural infractions and lacked the power to do so. The applicant Commissioner emphasized the difference between the provisions under Rule 12 of the former Central Excise Rules, 1944, which allowed for condonation of non-compliance in certain cases, and the stricter provisions under Rule 18 of the Central Excise Rules, 2001. The government observed that while the lower authorities focused on technical procedural grounds for rejecting the rebate claim, there were precedents emphasizing that substantial benefits should not be denied solely based on procedural infractions.

Interpretation of mandatory vs. directory rules in excise laws:
The government differentiated between mandatory and directory rules, stating that while strict compliance is required for mandatory rules, substantial compliance may suffice for directory rules. Citing judgments from the Hon'ble Tribunal and the Supreme Court, the government highlighted that substantive benefits should not be denied due to minor procedural infractions. The government upheld the impugned order, emphasizing that the rejection of the rebate claim was based on technical grounds and that there was no evidence of fraud or intentional non-compliance. Consequently, the Revision Application was rejected, and the impugned order was upheld based on the interpretation of procedural requirements in excise laws.