I am wanting to submit this image
(I lowered the quality and added some lines for safety reasons)
For those familiar with Studio Ghibli, this is a Kodama (For my pet Kodama)
There's a part in the upload part that states
I quite understand/not understand what they mean to copyright law but since the Kodama was redrawn and made to fit the form of a Chibi Ghostly does that count/not count as copyright infringment?
Also, if I submit it and it gets rejected for x reason, do I get my CSC back

http://subeta.net/explore/custom_clothing.php I know this link is for Custom Clothing but there's some information near the bottom about Tribute items which seems to fit with what you're asking. It talks about 4 changes and gives a bit of a visual explanation as well.
Well, I guess I'll stay safer not submiting as I don't know if I get refunded anyway so might not be worth. Thanks for the link ^^

You're welcome. I don't know anything about the refunding, one would assume they would refund that sort of thing. They have a refund policy in place for when you make a forum banner ad, if that get's rejected if you get your CSC back, so I would think it would be the same for custom overlays.
Hopefully someone else will come by and let you know for sure on the reject/refund information.