TMI BlogDoctrine of substantial complianceX X X X Extracts X X X X X X X X Extracts X X X X ..... Doctrine of substantial compliance - By: - CA Akash Phophalia - Central Excise - Dated:- 30-8-2016 - - Indirect tax laws has prescribed plethora of processes to be followed at different point of time to avail of different benefits. However, many times assessee failed to comply procedures in total and there is dispute between department and assessee regarding availment of benefits to assessee. This article aims at enlightening readers regarding the preference of substantial benefits over procedural compliances. However, this does not mean that to overlook procedural compliances at all. Doctrine of substantial compliance The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness , the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accepted . The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as essential. Therefore after making substantial compliance of the provisions there are no reasons to deny the prevent assessee of the benefits which would available otherwise. The concept of substantial compliance was followed in various judgements and benefits were extended to assessee. In the case of Jay Iron Steel Industries Ltd v/s CCE Raigad 2016 (2) TMI 636 - CESTAT MUMBAI it was held that ...substantial compliance procedure for claiming the abatement was made by the appellant .....it is clear that only due to minor procedure lapse, the abatement claim cannot be rejected..... In another case of Globe Private Detective Bureau v CCE Lucknow 2016 (5) TMI 179 - ALLAHABAD HIGH COURT it was held that ...subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial compliance by the appellant of this court s orders and consequently in the interest of revenue and to do substantial justice, the relaxation in time for deposit of the amount is well deserving and also within the powers available under the Act . In case of Telestar Travels Pvt LTd v Special Director, Directorate of Enforcement 2013 (2) TMI 396 - SUPREME COURT it was held that Coming to the case at hand, the adjudicating authority has mainly relied upon the statements of the appellants and the documents seized in the course of the search of their premises. But, there is no dispute that apart from what was seized from the business premises of the appellants, the adjudicating authority also placed reliance upon the docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts produced by Miss Anita Chotrani and Mr. Raut. These documents were, it is admitted, disclosed to the appellants, who were permitted to inspect the same. The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross-examination. Such being the case, the refusal of the adjudicating authority to permit cross-examination of the witnesses producing the documents cannot even on the principles of the Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the Courts below. The third limb of the case of the appellants also in that view fails and is rejected In Hari Chand Shri Gopal , an argument revolving around the doctrine of substantial compliance was raised. But, the Court pointed out that this doctrine is a judicial invention equitable in nature, designed to avoid hardship, where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequential aspects, which cannot be described as the essence or the substance of the requirements. In other words, if there are certain statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements, the fulfilment of which would not constitute the essence or substance, then the same can be ignored based upon this doctrine. in the case of Food Safety and Standards Authority of India v. Heartland Trading Company Pvt. Ltd., (supra), wherein the Hon ble Division Bench pointed out that the purpose of labelling is not to be ascertained by any one for diluting the rigours of the regulations and importing the concept of substantial compliance therewith and strict compliance principle seems to be the requirements of the regulations dictated by public interest that must prevail over any private interest of an importer. Conclusion From the discussion above it can be fairly concluded that substantial compliance is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n effective tool available to the assessee to save itself over the procedural compliances but it cannot override or replace the fulfilment of statutory requirement which are the essence or substance of the case. CA Akash Phophalia 9799569294 - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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