A PURELY PROCEDURAL REQUIREMENT CANNOT BE HELD TO BE MANDATORY

[Mr. M. GOVINDARAJAN]

For carrying out the provisions of any Act, Rules are framed framing the procedures to be followed.  Even the procedure may be prescribed by means of Notifications. Clarifications are also issued to clear the doubts in the procedural requirement.  The issue to be discussed in this article whether a procedural requirement is held to be mandatory or not with reference to decided case laws.

It has been settled by a series of judgments of the Hon’ble Supreme Court that a purely procedural requirement cannot be held to be mandatory.  The procedural provisions are capable of substantive compliance. There is no requirement of insisting on strict compliance therewith.  The Supreme Court in ‘Mangalore Chemicals & Fertilizers Limited V. Deputy Commissioner’ held that the mere fact that is a statutory does not matter one way or the other. There are conditions and conditions.  Some may be substantive, mandatory and based on consideration 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.

In ‘Zandu Chemicals Limited V. Union of India’ - 2014 (12) TMI 701 - BOMBAY HIGH COURT the petitioner is engaged in the manufacture and export of chemicals.  They had exported a consignment of medicaments under cover of ARE -1 No. 57/2005-06, dated 29.10.2005 on payment of the central excise duty of ₹ 10,70,353/- under Central Excise Invoice No. 57, dated 29.10.2005.  The petitioner filed an application claiming rebate of the central excise duty paid on the exported goods.  When they lodged their claim for refund, they intimated the department that they have lost/misplaced the original and duplicate copy of ARE-1 and therefore they could not be filed with the rebate claim.  However, collateral/contemporaneous documents for support the rebate claim were forwarded.  The petitioner was issued a show cause notice styled as a deficiency memo cum show cause notice proposing rejection of the rebate claim on the ground that the petitioners failed to submit original and duplicate copies of ARE-1.

The petitioner filed appeal before the Commissioner (Appeals).  The Commissioner (Appeals) allowed the appeal. The Commissioner (Appeals) has referred to the arguments of the petitioners that the original and duplicate copies of ARE-1 were lost after export of the consignment. A police complaint was also lodged by the petitioners.  The documents could not be recovered.  The Commissioner (Appeals) took the view that the condition of submission of original as well as duplicate copies of this form is not mandatory but directory. The Commissioner (Appeals) also referred to the procedure prescribed by a Notification that envisages handing over of original and quadruplicate copies of the ARE-1.  These are handed over to the exporter by the office of the Customs after completion of export procedure.  A duplicate copy has to be sent by it to the Rebate Sanctioning Authority either by post or through the exporter.  The triplicate copy of the ARE-1 is forwarded to the Rebate Sanctioning Authority by the jurisdictional Central Excise Officer. Therefore a comparison has to be undertaken by the authority with the original, duplicate and triplicate copies of ARE-1 and if satisfied that the claim is in order, he has to sanction the refund. The details of the duty payment are there on all copies of ARE-1. The difference has been noted in the copies and the original by the Commissioner and he held that the former carry the endorsement certificate of the Customs Officer regarding physical export of the goods.  However, even if these originals and duplicates are not submitted there were other documents like shipping bill.  The details of shipping bill, rotation number, selling date were got verified by the adjudicating authority from the concerned customs range office and they were found to be correct.  Hence the rejection of the rebate claim only due to non submission of original and photocopy of ARE-1 was not upheld by the Commissioner (Appeals).

The Department did not accept the order of Commissioner (Appeals) and filed the revision application before the Revisional Authority under Section 35EE of the Central Excise Act.  The Government of India is the Revisional Authority and it allowed the revision application reversing the order of the Commissioner (Appeals).

Against the revision order the petitioner filed the present writ petition before the High Court.  The petitioner submitted the following before the High Court:

• The stand of the revisional authority and that of the Government is patently illegal;
• What is required to be furnished is proof of evidence of export is supported by other documents since the original and zerox copy of the same are lost;
• Insistence on a form which is a procedural requirement could have been dispensed with.

The Revenue contended that this was not a case where any procedural formalities led to the rejection of the rebate claim. There was no proof of export and which could be only in the form of production of ARE-1. Neither the original nor the copy thereof was produced as it was admittedly misplaced. There was no fault with the order rejecting the rebate application. Therefore the High Court could not interfere with the revision order.

The High Court heard the arguments of both sides. The High Court did not see how the revisional authority could have interfered with such an order. The scope of revisional proceedings is now well settled.  The powers have to be exercised so as to correct a jurisdictional error.  In the absence of a conclusion that the findings are vitiated by an error of jurisdiction or the jurisdiction has been exercised with material irregularity resulting in manifest in justice, the revisional authority should not have interfered with the orders under challenged. That is not a power to interfere with factual findings and when they are supported by enough materials.  The findings of the fact consistent with the materials on record would bind the revisional authority unless they are demonstrated to be perverse or vitiated by any error of law apparent to the facts of the record.  There is no warrant to interfere with the same unless these tests are testified.

The High Court held that there is no requirement of insisting on strict compliance therewith.  If there is material on record which shows compliance with the procedural requirement as furnishing of ARE-1 form in original or duplicate and there is other proof of exports of the goods, then insistence on compliance with the filing of original or duplicate of ARE-1 was totally uncalled for unjustified.