Zeal In Collecting Taxes Must Be Reflected In Disbursing Lawful Rebates, Refunds: Calcutta High Court

The Calcutta High Court has observed that “the zeal in collecting taxes must equally be reflected when it comes up to disbursing lawful entitlements, whether in the form of rebate or refund," while dismissing the Revenue's appeal against an order allowing Haldia Petrochemicals Limited's excise duty rebate claim.

A Division Bench of Justice Ravi Krishan Kapur and Justice Atarup Banerjee held that procedural requirements cannot be treated as mandatory conditions for granting a rebate when payment of excise duty and export of goods have been established through duly certified documents.

The case arose from three shipments of Pyrolysis Gasoline (PG Gas) exported by Haldia Petrochemicals Limited between September and November 2003, after payment of excise duty. The company claimed a rebate of ₹2.25 crore under Rule 18 of the Central Excise Rules, 2002.

The authorities rejected the claim in December 2005. Although the Commissioner of Central Excise (Appeals) allowed the company's appeal in March 2007, the Revisional Authority accepted that the claim was admissible under Rule 18 but remanded the matter in July 2010 for further examination, citing the alleged non-production of documents evidencing duty payment and export. A Single Judge allowed the company's writ petition on January 8, 2019, holding that the ARE-1 forms had been duly submitted and there were no grounds to withhold the rebate.

The Revenue argued that the authorities were justified in seeking additional documents for verification. It contended that the rebate claim could be processed only after a comprehensive examination under the Supplementary Instructions, 2005.

The High Court, however, distinguished between the substantive conditions for claiming rebate and the procedure prescribed for processing such claims. It held that the essential requirements under Rule 18 were proof of payment of excise duty and export of the goods.

The bench observed that a claimant could substantiate the claim through all or any of the documents specified in Paragraph 8 of the Supplementary Instructions, 2005, or through secondary evidence.

"An assessee making a claim for rebate is required to substantiate its claim by cogent evidence. The claim is adjudicated on merits. A claimant can substantiate its claim on the basis of all or any of the documents mentioned in Paragraph 8 of the Supplementary Instructions, 2005 which deals with export under the claim for rebate or on the basis secondary evidence.", it ruled.

Relying on the Bombay High Court's decision in UM Cables Ltd. v. Union of India, the bench reiterated that procedural requirements are intended to facilitate the processing of rebate claims and cannot be elevated to mandatory conditions when the substantive requirements are fulfilled.

The court noted that the company's ARE-1 forms carried certifications from the Excise Authorities confirming payment of duty and from the Customs Authorities confirming export under their supervision. The company had also produced bank certificates evidencing export realisations and original shipping bills for verification.

The Revenue had never questioned the validity or genuineness of these forms during the proceedings.

"This is not a case of the ARE-1 forms being incomplete or incorrect. The validity and genuineness of the ARE-1 forms have not even been questioned at any prior stage of the adjudication proceedings. In fact, the ARE-1 forms have been issued by the Revenue Authorities. In such circumstances, there was no material whatsoever for the appellant to suspect their own documents."

The court further held that the Revenue could not travel beyond the show-cause notice and reject the claim on the vague ground of non-furnishing of relevant documents.

Finding no infirmity, perversity, or contravention of law in the Single Judge's order, the Division Bench dismissed the Revenue's appeal and disposed of all connected applications.

For Appellants: Advocates Bhaskar Prosad Banerjee and Tapan Bhanja, 

For Respondents: Advocates Agnibesh Sengupta, Gourab Karmakar and Upasana Bhattacharjee