2017 (10) TMI 399 - AT - Service Tax

Refund of unutilized CENVAT credit - Rule 5 of CCR, 2004 read with N/N. 27/2012-CE dated 18.6.2012 - denial on the ground that the export proceeds were realized in the Indian rupees and not in convertible foreign exchange - 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, Bank of America, USA, the receipt of Indian rupee shall be treated as convertible foreign exchange. Further, it is also clearly certified in the FIRC issued by the Bank of America, USA that remittances are in convertible foreign exchange. Reliance placed in the case of Sun-Areas Real Estate Pvt. Ltd. 2015 (5) TMI 885 - CESTAT MUMBAI , where it has been held that even though the appellant received the payment in Indian rupees but in view of the FEMA Notifications issued by the RBI, the same is deemed to be in convertible foreign exchange and accordingly the condition as provided u/r 3(2) of Export of Service Rules, 2005 stands complied. 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.

Summary

Issues Involved:
1. Rejection of refund claims based on the receipt of export proceeds in Indian Rupees instead of convertible foreign exchange.
2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005.
3. Admissibility of input service credit for security services and air travel services.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claims Based on Receipt of Export Proceeds in Indian Rupees:
The appellants filed refund claims for unutilized CENVAT credit on input services used for providing exported output services under Rule 5 of CENVAT Credit 2004 read with Notification No. 27/2012-CE dated 18.6.2012. The claims were rejected because the export proceeds were realized in Indian Rupees rather than in convertible foreign exchange. The appellants argued that the payments in Indian Rupees were permissible by the Reserve Bank of India and supported by the Certificate of Foreign Inward Remittances issued by their banker. They cited multiple Tribunal decisions affirming that payments received in Indian Rupees, routed through foreign banks, satisfy the requirement of convertible foreign exchange.

2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005:
The appellant's counsel contended that the rejection of refunds solely on the basis of receipt in Indian Rupees was contrary to judicial precedents. The Tribunal had consistently held that payments received in Indian Rupees through foreign banks should be treated as convertible foreign exchange. The Tribunal referenced several decisions, including BNY Mellon International Operations (I) Pvt. Ltd. vs. CCE, Pune-III, CST, Mumbai vs. M/s. PMI Organisation Centre Pvt. Ltd., and others, which established that Indian Rupees received from foreign banks meet the conditions of Rule 3(2)(b) of Export of Service Rules, 2005. The Tribunal also cited the Supreme Court judgment in J.B. Boda and Company, which supported the view that payments received in Indian Rupees through foreign banks are equivalent to convertible foreign exchange.

3. Admissibility of Input Service Credit for Security Services and Air Travel Services:
The Tribunal addressed the issue of admissibility of input service credit for security services and air travel services. It was noted that these issues were not raised in the show cause notice, and the denial of refund for these services was deemed incorrect. The Tribunal held that security services and air travel services have a direct nexus with the export services and are therefore admissible input services.

Conclusion:
The Tribunal concluded that the impugned orders rejecting the refund claims were not sustainable in law. It was determined that the payments received in Indian Rupees, when routed through foreign banks and supported by FIRCs, fulfill the condition of payment in convertible foreign exchange. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

Operative Portion:
The operative portion of the order was pronounced in Open Court on 18/09/2017.