Rebate Claims Dispute: Procedural Compliance vs. Substantive Benefit

POLYPLEX CORPORATION LTD. Versus COMMISSIONER OF CUSTOM & CENTRAL EXCISE MEERUT-II

POLYPLEX CORPORATION LTD. Versus COMMISSIONER OF CUSTOM & CENTRAL EXCISE MEERUT-II - 2014 (311) E.L.T. 923 (G. O. I.) Issues Involved:
1. Rejection of part rebate claims due to non-submission of original ARE-2 forms.
2. Compliance with procedural requirements for rebate claims.
3. Substantive vs. procedural conditions in rebate claims.
4. Entitlement to rebate claims based on evidence of export and duty-paid status.

Issue-wise Detailed Analysis:

1. Rejection of part rebate claims due to non-submission of original ARE-2 forms:
The applicants, engaged in manufacturing various films and availing area-based exemption under Notification No. 50/2003-C.E., filed rebate claims for Central Excise duty paid on goods used in the manufacture of exported goods. The adjudicating authority partially sanctioned the rebate amount but rejected part of it due to the non-submission of original ARE-2 forms, relying instead on photocopies. The Commissioner (Appeals) upheld this decision, leading to the filing of revision applications by the applicants.

2. Compliance with procedural requirements for rebate claims:
The applicants argued that they had submitted the original and duplicate copies of ARE-2 forms duly signed by Customs Authorities along with the rebate claims. They contended that the Commissioner (Appeals) ignored the standing instructions in the C.B.E. & C.'s Excise Manual, which should have been considered. The applicants cited that the goods were indeed exported, and the rebate of duty was claimed as per input-output norms fixed by the Assistant Commissioner.

3. Substantive vs. procedural conditions in rebate claims:
The applicants emphasized that the substantial benefit of rebate should not be denied due to procedural lapses. They cited the Supreme Court judgments in CST, UP v. Auriya Chamber of Commerce, Allahabad and Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner, which distinguish between substantive and procedural conditions. The Supreme Court held that non-observance of procedural conditions is condonable, whereas substantive conditions are not.

4. Entitlement to rebate claims based on evidence of export and duty-paid status:
The Government, upon reviewing the case records and submissions, noted that the rebate claims were otherwise in order, as the use of duty-paid inputs in the manufacture of exported goods was not disputed. The proof of export was available through Customs endorsements on shipping bills and duplicate ARE-2 forms. The applicants relied on the Bombay High Court judgment in UM Cables v. UOI, which held that non-production of original ARE-1 forms does not invalidate rebate claims if cogent evidence of export and duty-paid status is provided.

The Government concluded that the applicants were entitled to the rebate claims as the deficiency of non-availability of original ARE-2 forms was procedural. The rebate claims were admissible since the use of duty-paid inputs and export of goods were established through certified documents. The original authority was directed to sanction the rebate claims if they were otherwise found in order. The impugned orders were modified accordingly, and the revision applications were allowed in these terms.