While clarifying that the goods that are being brought to the place of export should be accompanied by ARE-1 to satisfy that the identity and quantity of the goods are the same as are mentioned in the ARE-1, the Madhya Pradesh High Court (Indore Bench) has ruled that the failure of the Petitioner/ Pharmaceutical manufacturer to follow such procedure disentitles him for the rebate on the exported goods in the absence of ARE-1, and the conduct of the Authority in denying such refund is perfectly justified. The Court also clarified that mere shipping bills and export invoices shall not entitle the manufacturer to the rebate of duty paid on exported goods if he deviates from the prescribed procedure and fails to accompany ARE-1 forms.
The Division Bench comprising Justice Vivek Rusia and Justice Binod Kumar Dwivedi emphasized that ARE-1 is not a mere procedural formality but a foundational document under Rule 18 of the Central Excise Rules and CBEC’s Excise Manual, which ensures that the goods cleared from the factory are the same as those exported. Absence of correlation between the two hinders the verification process, and therefore, non-compliance with such a mandatory condition renders it an incurable irregularity.
Speaking for the Bench, Justice Rusia pointed out that ARE-1 is the basic document on which the exporter has to export the goods under the claim of a rebate, and if the exporter exports goods from a place other than the factory, then permission for such export is required under sub-para 1.1(ii) of para 1 of the Part-I of Chapter 8 of the CBEC’s Manual. Since in the present case, the ARE-1 was not prepared at all, which is mandatory under the Central Excise Act, 1944, and the Rules of 2002, the Bench stated that it shall be the responsibility of the manufacturer to pay duty on the goods that are removed from the factory of production to a warehouse.
Briefly, in this case, the Petitioner – Ranbaxy Laboratories, a pharmaceutical formulations manufacturer at its Dewas unit, exported free samples to overseas markets. Initially, such exports were made without payment of duty, but following departmental instructions in 2002, the company began clearing the goods on payment of duty and exporting them through its New Delhi branch office. Subsequently, Petitioner filed two rebate claims of Rs. 28.97 lacs and Rs. 44.85 lacs under Rule 18 of the Central Excise Rules, 2002, supported by invoices & shipping bills, to establish export of duty-paid goods. While the Commissioner (Appeals) allowed the rebate, the Revisional Authority held that the absence of mandatory ARE-1 forms and direct factory export disentitled the Petitioner to a rebate. Challenging the same, Ranbaxy approached the High Court.
Appearances:
Advocate Agrim Arora, for the Petitioner/ taxpayer
Advocate Prasanna Prasad, for the Respondents/ Revenue
