Substantive compliance for returned export goods under Rule 173M(1) prevailed despite an undecided extension application.

Under Rule 173M(1) of the Central Excise Rules, 1944, export goods returned to the factory within the permissible period, entered in statutory records, and verified by the department were treated as substantially compliant. The pending extension application was not treated as a fatal defect because the factual return and departmental verification established compliance with the export-return procedure. Extension of time was granted, and the demand and penalty were set aside in favour of the assessee.

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Issues: Whether extension of time for return of exported goods under Rule 173M(1) of the Central Excise Rules, 1944 was warranted where the goods were received back in the factory, entered in the statutory records, verified by the departmental , and the application for extension was not decided.

Analysis: The goods were cleared for export without payment of duty, but the merchant exporter failed to export them and the goods were returned to the factory within the extended period. The return was intimated to the department, the goods were entered in the RG-1 account, and the Superintendent verified the stock. The application seeking extension of time was made to the competent authority, but it remained undecided. In these circumstances, the requirement of permission could not be treated as a fatal defect when the factual compliance with the export-return procedure stood established and the goods had already been brought back within the permissible period.

Conclusion: Extension of time under Rule 173M(1) was granted and the impugned demand and penalty were set aside in favour of the assessee.

Ratio Decidendi: Where export goods are returned to the factory within the permissible period, duly accounted for in statutory records, and the department has verified the return, non-disposal of the extension application cannot defeat substantive compliance under Rule 173M(1).

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