2025 (8) TMI 930 - HC - Central Excise

Rebate claim denied where ARE-I absent; Rules 18-20 require dual certification and Section 35EE review not interfered

M/s Ranbaxy Laboratories Ltd. Versus Union of India And Others

HC dismissed the petition and upheld rejection of the rebate claim where export samples were not shown as directly exported from the Dewas unit due to ... Rebate claim - rejection solely on the ground that the samples of P & P Medicaments were not exported directly from the Dewas unit, as no ARE-1 was prepared or submitted by the petitioner - Scope of judicial review - exercise of revisional powers under Section 35EE of the Central Excise Act, 1944 - HELD THAT:- As per Rule 18 of the Rules of 2002, the Central Government may, by notification, grant a rebate to duty paid on such excisable goods or materials used in the manufacture or processing of such goods, but that rebate shall be subject to conditions or limitations. Rule 19 stipulates that any excisable goods may be exported without payment of duty from a factory, the warehouse or any other premises as may be approved by the Commissioner, but the same shall be subject to such conditions, safeguards and procedure as may be specified by notification. As per Rule 20, the Central Government may, by notification, extend the facility of removal of any excisable goods from the factory to a warehouse or from one warehouse to another warehouse without payment of duty that too subject to conditions which may include penalty and interest. It shall be the responsibility of the manufacturer to pay of duty on the goods that are removed from the factory of production to a warehouse. In the form ARE-I, there are columns for mentioning the particulars for the Manufacturer of goods and the Central Excise Registration number, description of packages, gross weight and description of the goods. Part A of the form is to be certified by the Central Excise Officer, and Part B is a certification by the Customs Officer who certifies that the above-mentioned consignment was stuffed in the container number after verification of the contents from the container and details mentioned in the ARE-I. Further, the scope of judicial review is very limited under Articles 226 and 227 of the Constitution of India as held by the Apex Court in case of Shalini Shyam Shetty & Anr. vs. Rajendra Shankar Patil [2010 (7) TMI 877 - SUPREME COURT]. Thus, no interference is warranted in the impugned order dated 29.12.2025 passed by the Joint Secretary, Ministry of Finance/respondent No.2. Accordingly, the petition stands dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the revision under Section 35EE of the Central Excise Act, 1944 (read with the requirement in Section 35EE(1A) as contended) was maintainable when the revisional authority allowed the Department's revision against an appellate order allowing rebate claims. 1.2 Whether rebate of duty under Rules 18-20 of the Central Excise Rules, 2002 and Chapter 8 of the CBEC Excise Manual can be allowed in the absence of ARE-1 (Form A.R.E.1) and where goods were not exported directly from the factory but transferred to another office/warehouse and exported from there. 1.3 Whether procedural non-compliance (absence of ARE-1 / failure to follow prescribed export-examination procedure) is merely technical/directory and can be excused when substantive proof (shipping bills, invoices, batch correlations, customs seals) establishes that the duty-paid goods were exported. 1.4 What is the scope of judicial review under Articles 226/227 in interfering with departmental revision and whether the High Court should interfere with revisional exercise in the facts of this case. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Issue: Maintainability and exercise of revision under Section 35EE 2.1.1 Legal framework: Section 35EE confers revisional power on the Central Government to call for and examine records of orders passed by Commissioners/Appeals and to pass such orders as it thinks fit. Section 35EE(1A) (as relied upon by petitioner's counsel) requires formation of opinion that the appellate order is not legal or proper based on material evidence. 2.1.2 Precedent treatment: Parties referred to authorities on limits of revisional power and statutory construction (including apex and High Court authorities) emphasizing that clear statutory language must be given effect to and that revisional jurisdiction must be exercised within prescribed legal bounds. 2.1.3 Interpretation and reasoning: The Court considered the revisional authority's function and concluded that the Joint Secretary had formed an opinion that the appellate order was erroneous because it failed to apply mandatory procedural safeguards (ARE-1 and related procedures). The revisional authority assessed the factual matrix and statutory procedure under the Rules and the CBEC Manual and exercised revisional power accordingly. 2.1.4 Ratio vs. Obiter: Ratio - revision under Section 35EE can be exercised where the revisional authority is satisfied that the appellate order is erroneous for non-compliance with mandatory statutory procedure; Obiter - ancillary observations on the requirement of material basis for opinion. 2.1.5 Conclusion: The Court found no excess of jurisdiction by the revisional authority and held the revision maintainable and lawfully exercised on the ground that the appellate order overlooked mandatory procedural requirements essential for safeguarding revenue. 2.2 Issue: Necessity and mandatory nature of ARE-1 and prescribed export-examination procedure for rebate claims under Rules 18-20 and CBEC Manual 2.2.1 Legal framework: Rules 18-20 of the Central Excise Rules, 2002 empower rebate subject to conditions and procedure; Rule 19(3) permits Board notifications specifying procedure. Chapter 8 of the CBEC Excise Manual prescribes the A.R.E.1 form and examination/sealing procedure at place of export as the means to establish identity and quantity of goods removed from factory vis-à-vis goods exported. 2.2.2 Precedent treatment: Authorities cited emphasise literal construction of statutory requirements and the need to follow prescribed procedures when rules and notifications make them mandatory; coordinate and apex decisions were relied upon to show that mandatory forms and verification cannot be ignored. 2.2.3 Interpretation and reasoning: The Court analysed Rule 18 (rebate subject to conditions/procedure), Rule 19 (export without payment subject to conditions), Rule 20 (warehousing), Notification No.42/2001-CE(NT) and CBEC Manual Clause 7 (examination of goods and ARE-1 particulars). It held ARE-1 to be the basic documentary link: Part A certified by Central Excise Officer at place of removal and Part B certified by Customs on export to establish identity/quantity and to enable rebate claim filing. The Manual requires ARE-1 at place of export to ensure goods examined are the same as removed from factory. 2.2.4 Ratio vs. Obiter: Ratio - ARE-1 and the prescribed examination/sealing/verification procedure are mandatory where the statute/notification/manual require them and absence thereof precludes allowing rebate; Obiter - discussion of alternatives (self-sealing/self-certification) and practical particulars of ARE-1. 2.2.5 Conclusion: The Court concluded that ARE-1 and the prescribed procedure are essential preconditions for rebate claims in the circumstances where goods are not exported directly from the factory; absence of ARE-1 prevents necessary verification and therefore rebate cannot be allowed. 2.3 Issue: Sufficiency of secondary/correlative evidence when ARE-1 not prepared - whether procedural lapse excusable as technical/directory 2.3.1 Legal framework: Beneficial fiscal legislation permits curing of procedural lapses in certain situations, but Rules/Notifications may cast specific procedural requirements as mandatory to secure revenue safeguards. 2.3.2 Precedent treatment: The petitioner relied on High Court decisions where ARE-1 had been prepared but original/duplicate were lost/stolen (with FIR) and Court accepted secondary evidence; the respondents relied on decisions upholding mandatory compliance with statute and literal construction where procedure is clear and essential. 2.3.3 Interpretation and reasoning: The Court distinguished cases relied upon by petitioner (U.M. Cables and Raj Petro) because in those cases ARE-1 had been prepared and lost/stolen and there was an FIR; here ARE-1 was never prepared. The Court emphasised that when the statute/manual require ARE-1 to be prepared and certified to enable in situ verification, non-preparation cannot be equated to loss of prepared forms. The Court accepted that although courts frown upon hyper-technical denial of substantive rights, where procedure is mandatory to verify identity/quantity and safeguard revenue, absence of such procedure is not merely technical and defeats the rebate claim. 2.3.4 Ratio vs. Obiter: Ratio - secondary evidence or invoice-matching cannot substitute for mandatory ARE-1 when it has not been prepared; Obiter - acknowledgement that in limited circumstances (prepared ARE-1 lost with evidence) secondary evidence may suffice. 2.3.5 Conclusion: The Court held that the petitioner's documentary correlation and export documents, while establishing export, could not cure the substantive procedural defect of non-preparation of ARE-1; the lapse was not a mere technicality entitling to rebate. 2.4 Issue: Responsibility and consequences where goods are transferred from factory to another office/warehouse before export 2.4.1 Legal framework: Rule 19 permits export without payment from factory or warehouse subject to conditions; Rule 20 permits removal to warehouse without payment subject to conditions; CBEC Manual requires indication on ARE-1 of office with which rebate will be claimed; responsibility and verification obligations follow statutory provisions. 2.4.2 Interpretation and reasoning: The Court noted the statutory scheme contemplates exports directly from factory or from approved warehouses with prescribed safeguards; if export is made from a place other than factory, statutory procedure requires permission/endorsement and ARE-1 particulars to facilitate verification. The petitioner's mode (stock transfer to New Delhi then export) required compliance with sub-para 1.1(ii) of Chapter 8 (permission for export from place other than factory) and ARE-1 particulars linking removal to rebate office; non-observance precluded proper verification. 2.4.3 Ratio vs. Obiter: Ratio - removal to another place before export imposes additional procedural safeguards and the exporter must comply with them; Obiter - practical note that responsibility for duty may shift under Rule 20 provisions. 2.4.4 Conclusion: The Court concluded that because the goods were exported from a place other than the factory without requisite ARE-1 certifications/permission, the rebate claim could not be allowed. 2.5 Issue: Scope of judicial review under Articles 226/227 in interfering with departmental revision 2.5.1 Legal framework: High Court's superintendence under Article 227 is limited; intervention is warranted only to keep subordinate tribunals/authorities within bounds of their authority, where there is perversity, gross failure of justice, or breach of natural justice; courts should not interfere merely because another view is possible. 2.5.2 Interpretation and reasoning: The Court applied the principles of limited interference: it examined whether the revisional authority acted within statutory power, applied legal provisions, and whether there was patent perversity or jurisdictional error. Finding the revisional authority's decision to rest on mandatory procedural non-compliance and proper application of Rules/Manual, the Court held interference was not warranted. 2.5.3 Ratio vs. Obiter: Ratio - High Court will not exercise supervisory jurisdiction to substitute its view where revisional authority acted within its jurisdiction and no patent perversity or gross miscarriage of justice is shown; Obiter - reprise of principles limiting supervisory intervention. 2.5.4 Conclusion: The Court declined to interfere under Articles 226/227 and dismissed the petition. 3. CONCLUSION 3.1 The Court concluded that ARE-1 and the prescribed export-verification procedures under the Rules/Notification/CBEC Manual are mandatory preconditions for claiming rebate where goods are not exported directly from the factory; failure to prepare ARE-1 cannot be cured by secondary evidence when the form was never prepared. 3.2 The revisional authority lawfully exercised power under Section 35EE in setting aside the appellate order that disregarded mandatory procedural safeguards; there was no jurisdictional error or patent perversity requiring interference under Articles 226/227. 3.3 Result: The petition challenging the revisional order was dismissed.