High Court Upholds Rejection of Rebate Claims for Non-Submission of ARE-1

A pharmaceutical manufacturer exported samples of medicines for promotional purposes. Initially, samples were exported directly from the Dewas factory without payment of duty under ARE-1 forms. Later, as per directions of excise authorities, the company paid duty, cleared goods from Dewas to its New Delhi branch, and from there exported them with proper customs sealing and shipping documentation. Rebate claims were filed on 05.11.2003 for Rs. 28,97,561/- and on 24.11.2003 for Rs. 4,485,583/- under Rule 18 of the Central Excise Rules, 2002, for refund of duty paid. The Assistant Commissioner rejected the rebate claims for non-filing of ARE-1 and not exporting directly from the factory.

The Commissioner (Appeals) allowed the rebate, holding that procedural lapses cannot defeat substantive rights. Department filed a revision under Section 35EE, and the Joint Secretary allowed it on 29.12.2005, restoring the rejection of the rebate.

Issue raised:  Whether rebate claims under Rule 18 of the Central Excise Rules, 2002, can be denied solely due to non-filing of ARE-1 forms and non-direct export from the factory, despite admitted proof of duty payment and actual export.

HC’s Decision: The High Court upheld the revisional order rejecting the rebate. The court held that the ARE-1 form is a mandatory statutory document for establishing a correlation between duty-paid goods cleared from the factory and goods exported. Unlike cases where ARE-1 was prepared but later lost (e.g., U.M. Cables; Raj Petro Specialities), here ARE-1 was never prepared at all. Procedural compliance under Rule 18, read with the CBEC Manual, is not merely directory but mandatory to safeguard revenue.

In the absence of ARE-1, the rebate cannot be verified or granted. Judicial review under Articles 226/227 is limited; no interference warranted unless perversity or jurisdictional error, which was absent here.

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