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2017 (9) TMI 940 - AT - Service TaxRefund of unutilized CENVAT credit - rejection on the ground that payments have been received in Indian rupee which does not satisfy the requirement of Rule 3(2)(b) of Export of Service Rules, 2005 - Held that - this issue has been considered by various Benches of the Tribunal and it has been consistently held that merely because payment is received in Indian rupee, it cannot be said that payment against export has not been received in convertible foreign exchange as provided in Export of Service Rules, 2005. Since the Indian rupee is received from the recipient of services through their foreign bank, Silicon Valley Bank of USA, the receipt of Indian rupee shall be treated as convertible foreign exchange. When a person receives in India payment in rupees from the account of a bank situated in any country outside India maintained with an authorised dealer, the payment in rupees shall be deemed to have repatriated the realized foreign exchange to India - In the present case, the payment in Indian rupees was received from foreign country through Deutsche Bank. Therefore, the said Indian rupee is nothing but foreign exchange repatriated from foreign country to India. Therefore, such payment in rupees is equal to the foreign exchange. The payment received in Indian rupee for which FIRC issued by the Standard Chartered Bank and the payment is routed through foreign bank, shall fulfill the condition of payment (convertible foreign exchange) and therefore, the denial of refund on this ground is not sustainable - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Refund claim of unutilized CENVAT credit on input services used for providing output services exported. 2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005 regarding payment in convertible foreign exchange. 3. Validity of payments received in Indian rupees for exported services. Issue-wise Detailed Analysis: 1. Refund Claim of Unutilized CENVAT Credit: The appellant, registered under the category of Information Technology Software Support Services (ITSS), filed a refund claim for unutilized CENVAT credit on input services used in providing exported output services. The claim was made under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 27/2012-CE dated 18.6.2012. The Assistant Commissioner rejected the refund claims on the ground that the export was shown in Indian currency. The Commissioner (A) upheld this rejection, leading to the present appeal. 2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005: The core issue was whether the payments received in Indian rupees met the requirement of Rule 3(2)(b) of Export of Service Rules, 2005, which mandates payment in convertible foreign exchange. The appellant argued that the receipt of payments in Indian rupees, as permitted by the Reserve Bank of India (RBI) and certified by the Foreign Inward Remittance Certificate (FIRC), should be considered as payment in convertible foreign exchange. The appellant cited multiple tribunal decisions supporting this view, including cases such as BNY Mellon International Operations (I) Pvt. Ltd. vs. CCE, Pune-III and CST, Mumbai vs. M/s. PMI Organisation Centre Pvt. Ltd. 3. Validity of Payments Received in Indian Rupees: The tribunal considered various precedents and statutory provisions under the Foreign Exchange Management Act, 1999. It was consistently held that payment received in Indian rupees, if routed through a foreign bank and certified by FIRC, should be treated as convertible foreign exchange. The tribunal referred to several judgments, including CST vs. PMI Organization Centre Pvt. Ltd. and Sun-Areas Real Estate Pvt. Ltd. vs. CST, Mumbai-I, which established that Indian rupees received from a foreign bank account are deemed to be convertible foreign exchange. Conclusion: The tribunal concluded that the mere receipt of payment in Indian rupees does not disqualify it from being considered convertible foreign exchange if it is routed through a foreign bank and certified by FIRC. The tribunal found that the appellant's case met these conditions and thus, the denial of the refund was not sustainable. The impugned order was set aside, and the appeal was allowed with consequential relief. Operative Portion: The operative portion of the order was pronounced in open court on 07/09/2017, allowing the appeal and setting aside the impugned order.
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