ARE-2 omission alone cannot deny drawback or sustain penalty where no double benefit or intent to abet is shown.

Non-issuance of ARE-2 for de-oiled cake manufactured using duty-free hexane under Rule 19(2) did not, on these facts, justify denial of drawback or imposition of penalty. The Court held that the 1% drawback claimed by the merchant exporter related only to the customs component, not the central excise component, so no double benefit arose. It further found no conclusive evidence of intention or abetment by the petitioner, and mere omission to issue ARE-2 could not by itself establish a breach warranting penalty. The revisional order was therefore set aside to that extent.

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Issues: Whether the petitioner's non-issuance of ARE-2 while clearing de-oiled cake manufactured using duty-free hexane under Rule 19(2) of the Central Excise Rules, 2002 justified denial of duty drawback and confirmation of penalty.

Analysis: The controversy turned on whether the drawback claimed by the merchant exporter at the 1% rate was relatable only to the customs component or also to the central excise component, and whether omission to issue ARE-2 evidenced deliberate participation in an erroneous drawback claim. The Court noted that the Adjudicating Authority had not established any intention or conclusive evidence of abetment by the petitioner. It further held that, on the facts, the drawback rate was confined to the customs component and did not give rise to any double benefit, so the mere absence of ARE-2 could not by itself constitute a breach warranting penalty. The Revisional Authority had relied mainly on the non-issuance of ARE-2 without properly appreciating the nature of the drawback and the absence of any undue advantage to the exporter.

Conclusion: The non-issuance of ARE-2 did not justify denial of the exporter's drawback claim or sustain the penalty against the petitioner, and the revisional order was liable to be set aside to that extent.

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