Zandu Chemicals Ltd. vs Union of India

Rule. Respondents waive service. By consent, Rule made returnable forthwith. By this Petition under Article 226 of the Constitution of India, the Petitioner seeks a writ of Certiorari or any writ order or direction in nature thereof, calling for the papers and records and thereafter to quash and set aside the order dated 16th August, 2011 (Annexure-H to the Writ Petition) [2013 (297) E.L.T. 154 (G.O.I.)].

The further relief is seeking a direction to the respondents to grant a rebate claim made by the petitioners by rebate application dated 7th November, 2006 in the sum of Rs. 10,70,353/-.

The undisputed facts are that the petitioner company, inter alia, is engaged in the manufacture and export of chemicals which are falling under Chapter 29 of the Central Excise Tariff Act, 1985. The petitioners had exported a consignment of medicaments under cover of ARE-1 No. 57/2005-06, dated 29th October, 2005, on payment of the Central Excise Duty amounting to Rs. 10,70,353/- under Central Excise Invoice No. 57, dated 29th October, 2005. The petitioners filed an application claiming rebate of the Central Excise Duty paid on the exported goods. It was the case of the petitioners that when they lodged their claim for refund, they intimated the department that they have lost/misplaced the original and duplicate copy of ARE-1. Since that was misplaced, the same could not be filed with the rebate claim. However, collateral/contemporaneous documents to support the rebate claim, were forwarded. The complaint is that the requisite proof of export was on record, still the rebate claim has been rejected. The petitioners pointed out that they received a show cause notice and which has been styled as a deficiency memo cum show cause notice proposing rejection of the rebate claim on the alleged ground that the petitioners failed to submit original and duplicate copies of ARE-1. The reply was given to this show cause notice but eventually the petitioners were served with the order of rejection styled as Order-In-Original dated 3rd June, 2008. An Appeal was preferred before the Commissioner of Income Tax (Appeals) who allowed it by his order dated 14th September, 2009. The department did not accept that order at Annexure-E and filed the revision application at Annexure-F before the Revisional Authority under Section 35EE of the Central Excise Act, 1944. The Government of India is the revisional authority and it allowed the revision application thereby reversing the order of the Commissioner of Income Tax (Appeals).

Aggrieved by the same, the present petition has been filed.

Mr. Motwani, learned counsel, appearing on behalf of the petitioner relied upon the Annexures to this Writ Petition and one of which is stated to be a photocopy of the application for removal of excisable goods for export styled as ARE-1. He further relied upon the contemporaneous record evidencing export and which was considered by the appellate authority. In his submission, 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. There is nothing magical about a particular form being forwarded. Therefore, insistence on a form or a photocopy of the same being forwarded, which is a procedural requirement could have been dispensed with. Mr. Motwani has relied upon the observations and findings in the order of the Commissioner of Income Tax (Appeals).

He has also relied upon a Division Bench judgment of this Court which has been delivered in identical circumstances, namely, Writ Petition Nos. 3102 and 3103 of 2013 decided on 24th April, 2013 in the case of UM Cables Limited Vs. Union of India and Others, .

On the other hand, Mr. Jetly, submitted 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. No fault can be found with the order rejecting the rebate application. It is a possible view of the matter and hence, this Court should not interfere therewith in its writ jurisdiction. The writ jurisdiction cannot be invoked only to invite another view or substitution of a possible and probable view taken by the authorities. He, therefore, submits that the Writ Petition be rejected.

With the assistance of the learned counsel appearing for both sides, we have perused the Writ Petition and all Annexure thereto. We have perused both orders. The Commissioner of Income Tax (Appeals) has referred to the arguments of the petitioners that in the instant case, 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 of Income Tax (Appeals) has referred to the order of the lower authority rejecting the claim only on the ground that the documents, namely, ARE-1 are not placed on record. He took the view that the condition of submission of original as well as duplicate copies of this form is not mandatory but directory. However, the Commissioner of Income Tax (Appeals) has 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 this 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 duplicate copies are not submitted, then, there were other documents like shipping bill dated 31st October, 2005 on which ARE-1 No. 57, dated 29th October, 2005 was mentioned. The details of shipping bill, rotation number, sailing 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 of Income Tax (Appeals).

We do 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 injustice, the revisional authority should not have interfered with the orders under challenge. That is not a power to interfere with factual findings and when they are supported by enough materials. The findings of 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 on the face of the record. There is no warrant to interfere with the same unless these tests are satisfied. We find that paras 9.1, 9.2 and 9.3 of the revisional order refer to nothing but the procedural requirement. It has been settled by a series of judgments of the Hon''ble Supreme Court and this Court that a purely procedural requirement cannot be held to be mandatory. The procedural provisions are capable of substantial compliance. There is no requirement of insisting on strict compliance therewith. If there is material on record which shows compliance with such 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 ARE-1 was totally uncalled for and unjustified. Precisely, the Division Bench of this Court held this in UM Cables Ltd. (supra). The judgment in the field and delivered on 24th October, 2013 was not available and possibly that could be the justification for the view taken by the revisional authority. However, the Division Bench has held as under:-

"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 C.B.E. & C. 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 identity 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.

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.

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.

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 & Fertilizers Ltd. v. Deputy Commissioner. The Supreme Court held that the mere fact that a provision is contained in a statutory instruction "does not matter one way or the other". 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:

"The 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."

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."

In view of this authoritative pronouncement of the Division Bench of this Court and nothing contrary thereto being pointed out, we are of the opinion that the order passed by the Revisional authority is unsustainable. It is manifestly illegal and erroneous. It is also vitiated by a non-application of mind to the vital materials, namely, the shipping bills and which contain the endorsement necessary for recording a finding that the goods were indeed exported by the petitioners. The date of the ARE-1 has also been mentioned there with other details. In such circumstances, the view taken by the revisional authority cannot be sustained. The Writ Petition is allowed. The order passed, namely, Order in Original and which is confirmed by the revisional authority on 16th August, 2011 are both quashed and set aside. The order of the Commissioner of Income Tax (Appeals) dated 14th September, 2009 is restored. The Writ Petition is allowed in these terms. Rule made absolute accordingly. No orders as to costs.