2016 (12) TMI 439 - AT - Service Tax

Rebate of service tax u/r 5 of Export of Services Rules, 2005 read with Notification No. 11/2005-ST dated 19.04.2005 - receipt of foreign exchange - the rendering of marketing support and project management services to group company i.e. Rolls Royce Marine AS, Norway - whether export of services or not? - rejection of refund on the ground that the considerations for the services rendered by the Appellant to the foreign company have not been received in convertible foreign exchange - Held that - the payment has been received from the foreign customer via Christiania Bank OG, Kreditkasse. The Reserve Bank regulations permit such amounts received through intermediate nostro accounts as receipt of payment in Foreign exchange. Accordingly rebate claims under Rule 5 merits sanction since the only reason for rejection is non-receipt of payments in Foreign currency. The issue is no longer res integra as it has been decided in favour of assessee by the Tribunal in the case of M/s Samit Enterprises Pvt. Ltd. Versus CCE & ST (Adj.) , New Delhi, 2016 (6) TMI 831 - CESTAT NEW DELHI , wherein the Tribunal has held that where the commission is paid by the Indian buyers to the appellant as per arrangement with the foreign supplier sending the commission to the appellant, in effect, the commission was paid to the appellant on behalf of the foreign supplier only and can be deemed to have been paid in foreign exchange as the buyers would have had to remit the commission part also to the foreign supplier who would have in turn sent it to the appellant. This arrangement thus makes the procedure simpler without any material difference with regard to foreign exchange implication to India. Rebate allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to Impugned Order-In-Appeal dated 07.10.2011 rejecting rebate claim under Rule 5 of Export of Services Rules, 2005 for services rendered to a foreign company. Appellant's contention that FIRCs certified receipt in Indian Rupees equivalent to the foreign currency. Interpretation of Reserve Bank regulations on receipt of payments in convertible foreign exchange. Applicability of case laws like Samit Enterprises Pvt. Ltd., Mount Kellett Management Pvt. Ltd., and Sun-Area Real Estate Pvt. Ltd. in supporting the rebate claim.

Analysis:

The appeal challenges the Impugned Order-In-Appeal dated 07.10.2011, which dismissed the rebate claim under Rule 5 of Export of Services Rules, 2005 for services provided to a foreign company. The Appellant contended that FIRCs certified the receipt in Indian Rupees equivalent to the foreign currency. The Order-In-Original dated 31.08.2010 rejected the rebate claim, leading to the appeal. The Commissioner (Appeals) set aside all objections but issued a Show Cause Notice questioning the receipt of consideration in convertible foreign exchange. The Commissioner ultimately rejected the appeal based on this issue.

The key contention in the present appeal is that FIRCs have been issued certifying the receipt of payments in Indian Rupees equivalent to the foreign currency. The Appellant relied on Reserve Bank of India regulations recognizing such receipts. The Appellant cited various case laws, including Samit Enterprises Pvt. Ltd., Mount Kellett Management Pvt. Ltd., and Sun-Area Real Estate Pvt. Ltd., to support their position. The Tribunal analyzed the regulations and case laws to determine the validity of the rebate claim.

During the hearing, the authorities' rejection of the rebate claims under Rule 5 was discussed. The reason cited was the non-receipt of payments in convertible foreign exchange for services rendered to the foreign company. However, the records showed that FIRCs were issued by the Appellant's banks certifying the receipt in Indian Rupees equivalent to the foreign currency. The Tribunal noted that the payment was received via an intermediate nostro account, which aligns with Reserve Bank regulations on foreign exchange payments.

The Tribunal referred to the case of Samit Enterprises Pvt. Ltd., where a similar issue was resolved in favor of the assessee. The Tribunal highlighted the decision's rationale, emphasizing that payments made through intermediaries can be deemed as received in foreign exchange. Similar views were upheld in other case laws cited by the Appellant. Consequently, the Tribunal allowed the appeal, setting aside the Impugned Order and granting any consequential benefits to the Appellant.

In conclusion, the Tribunal's detailed analysis of the regulations, case laws, and factual circumstances led to the allowance of the appeal, overturning the rejection of the rebate claim based on the non-receipt of payments in convertible foreign exchange. The decision provided clarity on the interpretation of relevant laws and supported the Appellant's position with legal precedents.