Rebate Cannot Be Denied On Procedural Lapses If Export Duty Payments Are Undisputed: Gujarat High Court

The Gujarat High Court on 20 February, held that a rebate of central excise duty on exported goods cannot be denied merely due to procedural lapses, such as non-submission of original ARE-1 documents, when the fact of export and payment of duty is otherwise established through supporting records.

A Division Bench of Justice A. S. Supehia and Justice Pranav Trivedi allowed the writ petition filed by Ashland India Private Limited, setting aside orders that had rejected the company's rebate claim of Rs. 1.29 crore. The Bench observed:

“Merely because certain documents, though prescribed, are not produced, the claim cannot be rejected if, on the basis of other material on record, the exporter is able to establish compliance with the substantive conditions of export and payment of duty. The production of original and duplicate copies of ARE-1 is not the sole determinative requirement.”

The dispute arose after the petitioner, a merchant exporter, filed a rebate claim under Rule 18 of the Central Excise Rules, 2002, for duty paid on goods exported. The claim was initially filed on 29 December 2017 but was returned by the Department on the same day on the grounds that the petitioner had allegedly failed to comply with paragraph 3(b)(i) of Notification No.19/2004-Central Excise.

The company later re-submitted the claim in June 2018 after certain documents were misplaced during the relocation of its finance office from Mumbai to Hyderabad. The Assistant Commissioner subsequently examined the claim and sanctioned a rebate of Rs. 1.29 crore through an Order-in-Original, rejecting a small portion of the claim.

However, the Department reviewed the order, and the appellate authority later set aside the rebate sanction on two grounds: (ii) that the petitioner had not produced original ARE-1 documents and (ii) that the re-filed application was barred by limitation. The petitioner challenged the revisional order before the High Court.

The Court observed that the authorities themselves had not disputed the substantive eligibility of the petitioner's rebate claim and that the rejection was based solely on technical grounds. Further, the Assistant Commissioner had conducted a detailed examination of export documents, invoices, duty payments, shipping bills, and other supporting records before sanctioning the rebate.

It further found that the petitioner had submitted quadruplicate copies of ARE-1 forms along with an indemnity bond and other supporting documentation, which sufficiently established the export of goods and payment of duty.

Relying on earlier precedent, the Court held that submission of original and duplicate ARE-1 forms is a procedural requirement and not a mandatory condition when the export and duty payment can be established through other contemporaneous documents, such as shipping bills and invoices.

On the issue of limitation, the Court held:

“The Appellate Authority fell in error in rejecting the rebate claim on the ground of limitation, more particularly in wake of the fact that the original application was within time, and the same has been returned on the ground of technical defect, and the claim/application was not rejected. There was no order passed on the application rejecting the claim, but the same was returned. Hence, the Assistant Commissioner in his Order-in-Original dated 25.09.2018 has precisely held that claim was within time.”

Accordingly, the Court held that the rejection of the rebate claim on technical grounds was unsustainable and revived the original order sanctioning the rebate of Rs. 1.29 crore.

For Petitioner: Advocate, Amrita M. Thakore for Advocate, Bhavesh B Chokshi

For Respondent: Advocate, Hardika Vyas