2024 (9) TMI 692 - HC - Central Excise

Rebate of excise duty on materials used in the manufacture of goods - Rule 18 of the Central Excise Rules, 2002 - HELD THAT - In the instant case, admittedly there is no dispute that there is failure on the part of the petitioner to file the declaration and Form ARE-2. However, on the facts of the present case there is no dispute that admittedly the buses have been exported, foreign exchange has been received, etc. Petitioner has made a claim of rebate only qua excise duty on chassis which bears a number and the said number of chassis is correlated with the invoice received by petitioner from Volvo India and the export invoices of buses exported by petitioner. Petitioner has demonstrated this by way of sample copies of purchase invoice of chassis and commercial invoice raised by petitioner on its customers. The procedure for submitting input-output ratio is inconsequential in the facts of the present case since the claim of the petitioner is only qua excise duty paid on chassis purchased and used in the manufacture of buses which are exported. There is no dispute that petitioner has to comply with the conditions like export of goods, receipt of foreign exchange, etc. which Respondents are entitled to verify. Also it is important to note that in the facts of the present case the claim of rebate is made qua chassis on which excise duty is paid and each one of the chassis can be used to manufacture only one bus. The order passed by Respondent No. 2, revisional authority, dated 15th September 2020, and Order-in-Appeal dated 31st December 2013, and Order in Original dated 15th May 2012, is hereby quashed and set aside - Respondent No.4 is directed to consider the application dated 8th December 2011 made by petitioner for claim of rebate of Rs.42,02,638/- on its merits without rejecting the same on the ground that declaration and input-output ratio have not been filed - petition disposed off.

Issues Involved:
1. Jurisdiction of the Court.
2. Entitlement to rebate of excise duty.
3. Compliance with procedural requirements under Notification No. 21/2004.
4. Verification of input-output ratio.
5. Substantive benefit versus procedural lapses.

Detailed Analysis:

1. Jurisdiction of the Court:
The Court initially addressed the Respondents' preliminary objection on jurisdiction and ruled on 5th September 2024 that it has jurisdiction to hear the petitions. This decision allowed the petitions to be listed for consideration on merits on 6th September 2024.

2. Entitlement to Rebate of Excise Duty:
The Petitioner, a bus manufacturer, exported buses to Bangladesh without payment of duty during the period from 21st December 2010 to 28th February 2011. The Petitioner claimed a rebate of Rs. 53,65,198/- for excise duty paid on chassis purchased from Volvo India, which was used in manufacturing the exported buses. The claim was made under Notification No. 21/2004, which allows rebate of duty paid on excisable goods used in the manufacture of exported goods.

3. Compliance with Procedural Requirements:
The Assistant Commissioner of Central Excise rejected the rebate claim on the grounds that the Petitioner failed to file the declaration and Form ARE-2 as required under Notification No. 21/2004. This decision was upheld by the Commissioner of Central Excise (Appeals) and the revisional authority. The revisional authority confirmed that the non-compliance with the procedural requirements justified the rejection of the rebate claim.

4. Verification of Input-Output Ratio:
The Petitioner admitted to not filing the declaration and Form ARE-2 but argued that the substantive benefit of rebate should not be denied due to procedural lapses. The Petitioner demonstrated a one-to-one correlation between the chassis purchased (on which excise duty was paid) and the buses exported. The Petitioner contended that verification of the input-output ratio could be done post-export since the claim was restricted to excise duty on chassis alone.

5. Substantive Benefit versus Procedural Lapses:
The Court analyzed Rule 18 of the Central Excise Rules, 2002, and Notification No. 21/2004. It concluded that the rebate is subject to conditions like export of goods and receipt of foreign exchange, which are substantive, whereas the procedural requirements like filing declarations and verification of input-output ratio are directory. The Court emphasized that non-compliance with procedural requirements should not invalidate a rebate claim if the substantive conditions are met.

The Court referred to the case of U. M. Cables Ltd., where it was held that non-production of procedural documents (ARE-1 forms) does not automatically invalidate a rebate claim if the substantive conditions are fulfilled. The Court found this precedent applicable and ruled that the Petitioner's failure to file the declaration and Form ARE-2 should not result in the rejection of the rebate claim.

Judgment:
- The orders passed by the revisional authority, appellate authority, and original authority rejecting the rebate claims were quashed and set aside.
- The Respondent No. 4 was directed to reconsider the Petitioner's rebate application on its merits without rejecting it on the grounds of non-filing of the declaration and input-output ratio.
- The Respondent No. 4 was instructed to provide a personal hearing to the Petitioner and pass a reasoned order by 30th November 2024.

Conclusion:
The Court ruled in favor of the Petitioner, emphasizing that substantive benefits should not be denied due to procedural lapses. The rebate claims were to be reconsidered on their merits, ensuring compliance with the substantive conditions under Rule 18 of the Central Excise Rules, 2002.

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