Volvo Group India Pvt. Ltd. v. The Union of India

10. Per contra, Mr. Mishra, Learned Counsel for Respondents in opposition submitted that if an assessee wants the benefit of rebate notification then he has to comply with the requirements of the said notification strictly and if the said requirements are not complied with then an assessee is not entitled for claim of rebate. According to Mr. Mishra there is no dispute that there is a failure on the part of petitioner to file the declaration, Form ARE-2 and input-output ratio and therefore in the absence of the same the excise authorities could not have verified 6 of 20 the claim of the rebate. Mr. Mishra, defended the orders passed by the original, appellate and revisional authorities and prayed for dismissal of the petition. Mr. Mishra relied upon the following decisions in support of his submissions:- “(i) Mihir Textiles Ltd. Vs. Collector of Customs, Bombay, (1997 (92) E.L.T. 9 (S.C.));

(ii) Commissioner of Sales-tax UP Vs. Shiv Dori Niwar Industries,

(iii) Commissioner of Sales-Tax Vs. Prabhudayal Narain (iv), 1998

(iv) Arun International Vs. C.C.E. Delhi (12015 (317) E.L.T. 465

(v) Intas Pharma Ltd. Vs. Union of India, (2016 (332) E.L.T. 680

(vi) Commr. Of C. Ex. Chandigarh Vs. Karam Chand Appliances

(vii) Eagle Flask Industries Ltd. Vs. Commissioner of Central

11. The objective of granting a rebate of excise duty on materials used in the manufacture of goods which are exported is to make the products manufactured in India and exported outside India more price competitive in international market so that the country can earn valuable foreign exchange to buffer its reserves. With this objective, Rule 18 of the Central Excise Rules, 2002, has been enacted. Rule 18 provides that where any goods are exported, the Central Government 7 of 20 may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure as may be specified in the notification. Pursuant to the said Rule, Notification No. 21/2004 dated 6th September 2004, was notified specifying the procedure for making a claim of rebate. The relevant extract of Rule 18 and the Notification reads as under: “Rule 18:- Rule18. Rebate of duty – Where any goods are exported, the Central Government may, by notification, grant rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure as may be specified in the notification. Notification:- [3] Procedure for payment of Rebate of duty on excisable goods used in goods exported to any country except Nepal and Bhutan. - In exercise of the powers conferred by of rule 18 of the Central Excise Rules, 2002 and in supersession of the Ministry of Finance, Department of Revenue, notification No.41/2001-Central Excise (N.T), dated the 26th June, 2001 (GSR 470(E) dated the 26th June, 2001), the Central Government hereby, directs that rebate of whole of the duty paid on excitable goods (hereinafter referred to as ‘materials’) used in the manufacture or processing of export goods shall, on their exportation out of India, to any country except Nepal and Bhutan, be paid subject to the conditions and the procedure specified hereinafter:- (1) Filing of declaration:- The manufacturer or processor shall file a declaration with the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise having jurisdiction over the factory of manufacture describing the finished goods proposed to be manufactured or processed along with their rate of duty leviable and manufacturing/ processing formula with particular reference to quantity or proportion in which the materials are actually used as well as the quality. The declaration shall also contain the tariff classification, rate of duty paid or payable on the 8 of 20 materials so used, both in words and figures, in relation to the finished goods to be ex-ported. (2) Verification of Input-output ratio. The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise shall verify the correctness of the ratio of input and output mentioned in the declaration filed before commencement of export of such goods, if necessary, by calling for samples of finished goods or by inspecting such goods in the factory of manufacture or process. If, after such verification, the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise is also satisfied that there is no likelihood of evasion of duty, he may grant permission to the applicant for manufacture or processing and export of finished goods. (3) …. (4) …. (5) Procedure for export. - The goods shall be exported on the application in Form A.R.E.[2] specified in the Annexure to this notification and the procedures specified in Ministry of Finance (Department of Revenue) notification No.19/2004-Central Excise (N.T.), dated the 6th September, 2004 or in Notification No.42/2001-Central Excise (N.T.), dated the 26th June, 2001 shall be followed. (6) Presentation of claim of rebate- The claim for rebate of duty paid on materials used in the manufacture or processing of goods shall be lodged only with the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction of the place approved for manufacture or processing of such export goods.”

12. On a reading of Rule 18, in our view the rebate is subject to conditions/limitations and fulfillment of procedure specified in the notification. The conditions/limitations would be that the goods have been exported, sale proceeds in foreign exchange received. According to us, the phrase “conditions or limitations” would mean substantial compliance of such conditions so as to be eligible for rebate. The second part of Rule 18 provides that a person making rebate claim should fulfil 9 of 20 the procedure specified in the notification. Therefore, in our view what is specified in the notification is a procedure which is required to be followed for making a claim but the entitlement of the claim would be based on the fulfillment of the conditions like exporting the goods, receipt of foreign exchange, actual verification of input-output ratio, etc. It is not that once a procedure specified in the notification is followed that an assessee becomes automatically entitled to the claim of rebate. The entitlement would be only on the satisfaction of various conditions specified above.

13. In the instant case, admittedly there is no dispute that there is failure on the part of the petitioner to file the declaration and Form ARE-2. However, on the facts of the present case there is no dispute that admittedly the buses have been exported, foreign exchange has been received, etc. Petitioner has made a claim of rebate only qua excise duty on chassis which bears a number and the said number of chassis is correlated with the invoice received by petitioner from Volvo India and the export invoices of buses exported by petitioner. Petitioner has demonstrated this by way of sample copies of purchase invoice of chassis and commercial invoice raised by petitioner on its customers. It is not the case of revenue that one chassis can be used to manufacture two buses and rightly so. Therefore, in our view on the facts of the present case verification of input-output ratio although not submitted 10 of 20 before the export of goods cannot mean that same cannot be verified post export. It is not a case where various raw materials on which excise duty is paid has gone into manufacture of one unit of a product which is exported. Therefore, particularly on the basis of the analysis made above, the procedure for submitting input-output ratio is inconsequential in the facts of the present case since the claim of the petitioner is only qua excise duty paid on chassis purchased and used in the manufacture of buses which are exported.

14. In our view, therefore, the non-filing of declaration, and input-output ratio specified in the procedure notified in Notification NO. 21 of 2004 dated 6th September 2004 cannot be treated as a condition to be satisfied on the non-fulfillment of which the claim of rebate is to be rejected.

15. On a query raised by the Court, it was stated by Petitioner that they have been regularly filing the claim for rebate as per the Notification No.21 of 2004 dated 6th September 2004, even before the present claim which arose for the period from 21st December 2010 to 28th February 2011 was made. On a perusal of the information required to be furnished in the declaration as per the said notification, what is required to be furnished in the said declaration is the rate of duty leviable, manufacturing/processing formulae with particular reference to quantity or proportion in which the materials are actually used, tariff 11 of 20 classification, etc. The input-output ratio furnished in the declaration is subject to verification by Assistant Commissioner of Central Excise and if necessary, the Officer may call for samples of goods, etc. In our view, if Petitioner has filed the declarations prior to December 2010 with respect to rebate claim arising out of the export of buses which are manufactured by using the chassis, then certainly, the declaration which is now required to be filed for the present claim is already available on the record of Respondent No.4. Therefore, non-filing of declaration cannot be fatal on the facts of the present case to reject the claim of rebate only on this particular ground. Insofar as filling of form ARE-2 is concerned, Respondent No.4 can certainly verify based on post export documents what was required to be mentioned in the said form and necessary undertaking could be given by Petitioner which otherwise Petitioner would have to be declared in the said Form ARE-2. Therefore, in our view, on the facts of the present case, certainly, the rebate claim of Petitioner is required to be examined on merits and if found eligible can certainly be considered under Rule 18 of the Central Excise Rules. Rebate shall be given upon Petitioner talling the details of chassis purchased with details of chassis exported with the buses.

16. The issue whether non-production of such a declaration would justify rejection of rebate claim came up for consideration before this Court in the case of U. M. Cables Ltd. (supra) and his Lordship 12 of 20 Justice Shri. D. Y. Chandrachud (as he then was) after analysing Rule 18 of Central Excise Rules with which we are concerned observed as under: “10. Rule 18 of the Central Excise Rules 2002 empowers the Central Government by a notification to grant a rebate of duty paid on excisable goods or on materials used in the manufacture or processing of such goods, where the goods are exported. The rebate under Rule 18 shall be subject to such conditions or limitations, if any, and the fulfillment of such procedure as may be specified in the notification. Rule 18, it must be noted at the outset, makes a clear distinction between matters which govern the conditions or limitations subject to which a rebate can be granted on the one hand and the fulfillment of such procedure as may be prescribed on the other hand. The notification dated 6 September 2004 that has been issued by the Central Government under Rule 18 prescribes the conditions and limitations for the grant of a rebate and matters of procedure separately. Some of the conditions and limitations are that the excisable goods shall be exported after the payment of duty directly from a factory or warehouse, except as otherwise permitted by the CBEC; that the excisable goods shall be exported within six months from the date on which they were cleared for export from the factory of manufacture or warehouse or within such extended period as may be allowed by the Commissioner; that the market price of the excisable goods at the time of export is not less than the amount of rebate of duty claimed and that no rebate on duty paid on excisable goods shall be granted where the export of the goods is prohibited under any law for the time being in force. The procedure governing the grant of rebate of central excise duty is specified in the same notification dated 6 September 2004 separately. Broadly speaking the procedure envisages that the exporter has to present four copies of an application in form ARE-1 to the Superintendent of Central Excise. The Superintendent has to verify the identity of the goods and the particulars of the duty paid and after sealing the packet or container, he is required to return the original and duplicate copies of the application to the exporter. The triplicate copy is to be sent to the officer with whom a rebate claim is to be filed either by post or by handing it over to the exporter in a tamper proof sealed cover. After the goods arrive at the place of export, they are presented together with the original and duplicate copies of the application to the Commissioner of Customs. The Commissioner of Customs after examining the consignment with the particulars cited in the application is to allow the export if he finds that the particulars are correct and to certify on the copies of the application that the goods have been duty exported. The claim for rebate of duty is presented to the Assistant or Deputy Commissioner of Central Excise who has to compare the duplicate copy of the application received from the officer of customs with the original copy received from the exporter and the triplicate received from the central excise officer.

11. The Manual of Instructions that has been issued by the CBEC specifies the documents which are required for filing a claim for rebate. Among them is the original copy of the ARE-1, the invoice and self attested copies of the shipping bill and the bill of lading. Paragraph 8.[4] 13 of 20 specifies that the rebate sanctioning authority has to satisfy himself in respect of essentially two requirements. The first requirement is that the goods cleared for export under the relevant ARE-1 applications were actually exported as evident from the original and duplicate copies of the ARE-1 form duly certified by customs. The second is that the goods are of a duty paid character as certified on the triplicate copy of the ARE-1 form received from the jurisdictional Superintendent of Central Excise. The object and purpose underlying the procedure which has been specified is to enable the authority to duly satisfy itself that the rebate of central excise duty is sought to be claimed in respect of goods which were exported and that the goods which were exported were of a duty paid character.

12. The procedure which has been laid down in the notification dated 6 September 2004 and in CBEC's Manual of Supplementary Instructions of 2005 is to facilitate the processing of an application for rebate and to enable the authority to be duly satisfied that the two fold requirement of the goods having been exported and of the goods bearing a duty paid character is fulfilled. The procedure cannot be raised to the level of a mandatory requirement. Rule 18 itself makes a distinction between conditions and limitations on the one hand subject to which a rebate can be granted and the procedure governing the grant of a rebate on the other hand. While the conditions and limitations for the grant of rebate are mandatory, matters of procedure are directory.

13. A distinction between those regulatory provisions which are of a substantive character and those which are merely procedural or technical has been made in a judgment of the Supreme Court in Mangalore Chemicals & Fertilizers Ltd. Vs. Deputy Commissioner - 1991 (55) E.L.T. 437 (SC). The Supreme Court held that the mere fact that a provision is contained in a statutory instruction "does not matter one way or the other". The Supreme Court held that non-compliance of a condition which is substantive and fundamental to the policy underlying the grant of an exemption would result in an invalidation of the claim. On the other hand, other requirements may merely belong to the area of procedure and it would be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes which they were intended to serve. The Supreme Court held as follows: "The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some other may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve."

14. The particulars which are contained in Form ARE-1 relate to the manufacturer of the goods, the number and description of the packages, the weight, marks and quantity of the goods and the description of the goods. Similarly, details are provided in regard to the value, duty, the 14 of 20 number and date of invoice and the amount of rebate claimed. Part A contains a certification by the central excise officer to the effect inter alia that duty has been paid on the goods and that the goods have been examined. Part B contains a certification by the officer of the customs of the shipment of the goods under his supervision.

15. …..

16. However, it is evident from the record that the second claim dated 20 March 2009 in the amount of Rs.2.45 lacs which forms the subject matter of the first writ petition and the three claims dated 20 March 2009 in the total amount of Rs.42.97 lacs which form the subject matter of the second writ petition were rejected only on the ground that the Petitioner had not produced the original and the duplicate copy of the ARE-1 form. For the reasons that we have indicated earlier, we hold that the mere non-production of the ARE-1 form would not ipso facto result in the invalidation of the rebate claim. In such a case, it is open to the exporter to demonstrate by the production of cogent evidence to the satisfaction of the rebate sanctioning authority that the requirements of Rule 18 of the Central Excise Rules 2002 read together with the notification dated 6 September 2004 have been fulfilled. As we have noted, the primary requirements which have to be established by the exporter are that the claim for rebate relates to goods which were exported and that the goods which were exported were of a duty paid character. We may also note at this stage that the attention of the Court has been drawn to an order dated 23 December 2010 passed by the revisional authority in the case of the Petitioner itself by which the nonproduction of the ARE-1 form was not regarded as invalidating the rebate claim and the proceedings were remitted back to the adjudicating authority to decide the case afresh after allowing to the Petitioner an opportunity to produce documents to prove the export of duty paid goods in accordance with the provisions of Rule 18 read with notification dated 6 September 2004 (Order No.1754/2010-CX, dated 20 December 2010 of D. P. Singh, Joint Secretary, Government of India under Section 35EE of the Central Excise Act, 1944). Counsel appearing on behalf of the Petitioner has also placed on the record other orders passed by the revisional authority of the Government of India taking a similar view (Garg Tex-O-Fab Pvt. Ltd., 2011 (271) E.L.T. 449 and Hebenkraft – 2011 (136) E.L.T. 979. The CESTAT has also taken the same view in its decisions in Shreeji Colour Chem Industries Vs. Commissioner of Central Excise- 2009 (233) E.L.T. 367, Model Buckets & Attachments (P) Ltd. Vs. Commissioner of Central Excise- 2007 (217) E.L.T. 264 and Commissioner of Central Excise Vs.

TISCO – 2003 (156) E.L.T. 777.

17. We may only note that in the present case the Petitioner has inter alia relied upon the bills of lading, banker's certificate in regard to the inward remittance of export proceeds and the certification by the customs authorities on the triplicate copy of the ARE-1 form. We direct that the rebate sanctioning authority shall reconsider the claim for rebate on the basis of the documents which have been submitted by the Petitioner. We clarify that we have not dealt with the authenticity or the 15 of 20 sufficiency of the documents on the basis of which the claim for rebate has been filed and the adjudicating authority shall reconsider the claim on the basis of those documents after satisfying itself in regard to the authenticity of those documents. However, the rebate sanctioning authority shall not upon remand reject the claim on the ground of the non-production of the original and the duplicate copies of the ARE-1 forms, if it is otherwise satisfied that the conditions for the grant of rebate have been fulfilled. For the aforesaid reasons, we allow the Petitions by quashing and setting aside the impugned order of the revisional authority dated 22 May 2012 and remand the proceedings back to the adjudicating authority for a fresh consideration. The rejection of the rebate claim dated 8 April 2009 in the first writ petition is, however, for the reasons indicated earlier confirmed. Rule is made absolute in the aforesaid terms.”

17. In our view, the ratio of the above decision squarely applies to the facts of the petitioner inasmuch as in the said case of U. M. Cables (supra) the copies of declaration could not filed because they were lost. In our view, the consequences whether the declaration is not filed at all or the declaration is lost would be same inasmuch as in both cases the revenue would not have the benefit of the declaration which is required to be filed as per the notification. Therefore, in our view, petitioner is justified in placing reliance on the decision of this Court in the case of

U. M. Cables Ltd. (supra). The said decision of U. M. Cables (supra) has been subsequently followed by this Court in the case of Kaizen Plastomould Pvt. Ltd. (supra) and Zandu Chemicals Ltd. (supra).

18. The decisions relied upon by Mr. Mishra are not applicable to the facts of the present case. None of the decisions is on Rule 18 of the Central Excise Rules, 2002. The decisions relied upon lay down a general proposition that non-compliance of conditions has to be strictly 16 of 20 construed if an assessee makes an application for any benefit or concession. In our view, as observed above, Rule 18 provides for rebate which is subject to conditions and secondly on fulfillment of the procedure notified. We are concerned with the fulfillment of the procedure notified, in the present case and not with the conditions. There is no dispute that petitioner has to comply with the conditions like export of goods, receipt of foreign exchange, etc. which Respondents are entitled to verify. Also it is important to note that in the facts of the present case the claim of rebate is made qua chassis on which excise duty is paid and each one of the chassis can be used to manufacture only one bus. Therefore, on the facts of the present case the decisions relied upon by respondents would not be applicable, but on the contrary the decisions of this Court relied upon by petitioner directly deals with the issue under consideration and therefore respectfully following the decisions of this Court, we are inclined to allow the petition by passing following order. O R D E R (a) Order passed by Respondent No.2, revisional authority, dated 15th September 2020, and Order-in-Appeal dated 27th December 2013, and Order in Original dated 14th May 2012, is hereby quashed and set aside. (b) Respondent No.4 is directed to consider the application 17 of 20 dated 8th December 2011 made by petitioner for claim of rebate of Rs. 53,65,198/- on its merits without rejecting the same on the ground that declaration and inputoutput ratio have not been filed.

(c) Respondent No.4 is entitled to examine all other aspects with respect to the claim of petitioner.

(d) Respondent No.4 would give personal hearing to petitioner, notice whereof would be intimated to petitioner at least 5 working days before the date of personal hearing. If petitioner wishes to record what transpired at personal hearing, then same may be filed within 3 working days from the date of personal hearing. Respondent No.4 would consider all the documents and submissions and pass a reasoned and speaking order disposing the application for claim of rebate of the petitioner. Respondent No.4 would pass the order on or before 30th November 2024.

19. Rule made absolute in above terms.

WRIT PETITION NO.2910 OF 2021:-

20. For the reasons recorded above, we pass the following order:- 18 of 20 O R D E R (a) Order passed by Respondent No.2, revisional authority, dated 15th September 2020, and Order-in-Appeal dated 31st December 2013, and Order in Original dated 15th May 2012, is hereby quashed and set aside. (b) Respondent No.4 is directed to consider the application dated 8th December 2011 made by petitioner for claim of rebate of Rs.42,02,638/- on its merits without rejecting the same on the ground that declaration and inputoutput ratio have not been filed.

(c) Respondent No.4 is entitled to examine all other aspects with respect to the claim of petitioner.

(d) Respondent No.4 would give personal hearing to petitioner, notice whereof would be intimated to petitioner at least 5 working days before the date of personal hearing. If petitioner wishes to record what transpired at personal hearing, then same may be filed within 3 working days from the date of personal hearing. Respondent No.4 would consider all the documents and submissions and pass a reasoned and speaking order disposing the application for claim of rebate of the petitioner. Respondent No.4 would pass the order on or 19 of 20 before 30th November 2024.

21. Rule made absolute in above terms.

22. Writ Petition Nos.3128 of 2024, 2188 of 2022, 3587 of 2022 and 5120 of 2022 are to be listed on 18th September 2024. [JITENDRA JAIN, J.] [K. R. SHRIRAM, J.]