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TMI Blog2023 (6) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse situated in any country outside India, maintained with an authorized dealer. The appellant has furnished FIRC documents before the authorities below - the view taken by the department that appellant has not received consideration in convertible foreign exchange is without any factual or legal basis. The contention of the appellant that the services were exported stands established. The levy of service tax on MRASS TTAS, therefore cannot sustain and the demand of Rs.64,14,478/- requires to be set aside. Reversal of CENVAT Credit - value of exempted services provided by them as required under Rule 6 (3) of CCR 2004 - Department is of the view that as the appellant had not intimated the department that they are exercising the option in terms of Rule 6 (3A) - HELD THAT:- The appellant has been asked to pay 6% / 8% of the value of exempted services. This issue is no longer res integra. The Tribunal in the case of M/S. RELIANCE LIFE INSURANCE CO. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [ 2017 (10) TMI 400 - CESTAT MUMBAI ] analysed the issue and held that procedure given in Rule 6 (3A) of CCR 2004 is intended to make Rule 6 (3) workable and available to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from 16.05.2008. The appellant by import sale of software as a dealer provided to their clients, the right to use information technology software for commercial exploitation including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in the software products which would fall within the definition of Information Technology Software Service (ITSS). The expenditure incurred in foreign currency accounted in the books of accounts towards import of software related to taxable services provided by their parent company situated outside India. The appellant being recipient of services provided by a person from a country other than India was liable to pay service tax in terms of Section 66A of the Finance Act, 1994 and Section 67 (4) (c) of the Finance Act, 1944. 3. On scrutiny of balance sheets for the years 2005-06, 2006-07, 2007-08 2008-09 and invoices raised on the parent company it was noticed that appellant had accounted income under the heads Inter Co-consulting / Professional fees and Inter Company income . The appellant had occasionally sent engineers to USA to undertake tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 and March 2010 towards payment of service tax relating to the months of December 2009, January 2010 and February 2010 respectively. The appellant was thus liable to pay interest of Rs.59,071/- for wrong utilization of cenvat credit. 7. Further, the appellant was also providing exempted services to educational institutions and certain units situated in Special Economic Zone. Rule 6 (3) of Cenvat Credit Rules, 2004 provides that appellant has to reverse the credit proportionate to the value of exempted services. The appellant had not intimated the department of their option to reverse credit on proportionate basis. The appellant is therefore liable to pay an amount equivalent to 8% (from 01.04.2008 to 06.07.2009) or 6% (from 06.07.2009) of the value of exempted services for the period August 2008 to March 2010 which amounted to Rs.15,15,699/-. 8. The show cause notice dt. 04.04.2011 was issued proposing to demand service tax on the taxable services as above and to recover the wrongly availed credit. After due process of law, the original authority vide impugned order confirmed the demand of service tax to the tune of Rs.64,14,748/- under Technical Testing and Analysis Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service, which is taxable under clause (105) of Section 65 of the Finance Act, 1994, may be exported without payment of service tax . As per Rule 3 (2) of the said rules, the provision of any taxable services specified in sub-rule (1) of Rule 3 shall be treated as export of service subject to fulfilment of conditions namely:- (a) such service is provided from India and used outside India; and (b) payment for such service is received by the service provider in convertible foreign currency. 11. It is not disputed that the services were provided by the appellant to their parent company at USA. The department has denied to consider that the services have been exported alleging that appellant has received consideration in Indian rupees and not convertible foreign exchange. The said rule 3 (2) uses the word convertible foreign exchange and not convertible foreign currency as mentioned in the SCN. It is submitted by the counsel that show cause notice which is the basis of the case put forward by the department has been issued on the wrong application of the provisions of law. 12. The Counsel explained that the demand for the services rendered by the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is as below: 4. Manner of Repatriation :- (1) On realization of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and (a) Sell it to an authorized person in India in exchange for rupees; or (b) Retain or hold it in account with an authorized dealer in India to the extent specified by the Reserve Bank; or (c) Use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank. (2) A person shall be deemed to have repatriated the realized foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorized dealer. 15. It is submitted that as per the above Rules, payment from a bank account situated in a Country outside India other than Nepal or Bhutan or member Country of Asian Clearing Union and received in Rupees in India would amount to receipt of convertible foreign exchange. In the instant case, the payment has been made by the foreign parent Company from accounts in Banks situated in the United Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Service Tax, Kolkata, 2019 (9) TMI 1526 CESTAT KOLKATA Sun-Area Real Estate Pvt. Ltd. v. Commissioner of Service Tax, Mumbai-I, 2015 (5) TMI 885 CESTATE MUMBAI. 18. The decisions in the case of M/s.BCP Advisors Pvt. Ltd. Vs CST Mumbai-I - 2017 (9) TMI 92 CESTAT MUMBAI and in the case of Fives India Engineering Projects Pvt. Ltd. Vs Commissioner - 2019 (8) TMI 747 CESTAT CHENNAI were relied to support the above contention. 19. In regard to demand raised alleging that appellant has failed to exercise the option under rule 6 (6) (ii) of the CCR 2004 and therefore is liable to pay 6% / 8% of the value of exempted services, Ld. Counsel submitted that appellant has in fact reversed the amount attributable to value of exempted services provided by them to educational institutions. The said reversal has not been considered by the department holding that appellant had not intimated the department that they have opted to reverse the credit attributable to the value of exempted services as required under the said provision. The condition that the appellant has to intimate the department opting to reverse the credit is only procedural in nature and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these services have been exported on the ground that the appellant has not received the consideration in convertible foreign exchange. Ld. Counsel has explained the provisions with regard to manner of receipt in foreign exchange. As per said rules, a person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorized dealer. The appellant has furnished FIRC documents before the authorities below. Sample copies were produced before us also. The very same issue was considered by the Tribunal in the case of Mitsubishi Heavy industries India Pvt. Ltd. CCE Delhi - 2017 (9) TMI 358 CESTAT DELHI. The discussion made by the Tribunal is as under : 7 . The only point of dispute in the present appeal is whether or not the appellant received the consideration for service, in convertible foreign exchange. We have perused one of the certificates of Foreign Inward Remittance issued by the Bank of Tokyo Mitsubishi UFJ Ltd., New Delhi. The said certificate states that the specified amount has been remitted by Mitsubishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of consideration in convertible foreign exchange, the same shall stand satisfied, if the recipient of service transfers the money from his account which is in convertible foreign currency and remitted to Indian provider of service. The credit to account of Indian recipient of money at the bank of Indian recipient, will necessarily be in Indian rupees. It is apparent that no foreign exchange amount can be credited in bank located in India. The transactions are in Indian rupees. This aspect has been examined by the Tribunal in Balaji Telefilms Ltd. - 2016 (43) S.T.R. 98 (T-M). The Tribunal observed as below :- 14. That brings us to the second condition, viz., receipt of consideration in convertible foreign currency. The contract, undoubtedly, designates the consideration in Indian rupees. It is claimed by the respondent that this is normally resorted to so that the service provider is not put to loss on account of currency fluctuations and that, by such designation, the producer in India is assured of receiving the contracted amount; undeniably, a necessary factor in minimizing the risk of budgetary overrun. This justification is, unarguably, acceptable as logical. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the authority below observing that the appellants have included the element of service tax in the debit note and, therefore, the refund is hit by doctrine of Unjust Enrichment, cannot sustain. Further, the learned counsel for the appellant has furnished various documents to show that the element of service tax was not collected from the service recipient but only the value of services were received, as seen from the bank statement issued from foreign bank. Therefore, the issue of unjust enrichment is also held in favour of the appellant. 25. Following the proposition laid in the above decisions, we are of the considered opinion that the view taken by the department that appellant has not received consideration in convertible foreign exchange is without any factual or legal basis. The contention of the appellant that the services were exported stands established. The levy of service tax on MRASS TTAS, therefore cannot sustain and the demand of Rs.64,14,478/- requires to be set aside, which we hereby do. 26. The second issue is with regard to allegation that the appellant has to reverse the cenvat credit which is attributable to the value of exempted services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t noncompliance with the procedure prescribed under Rule 6 (3A) of the CCR does not result in loosing substantive right to avail the option of reversing proportionate credit as envisaged in Rule 6(3) (i); That procedural lapse is condonable and denial of substantive right is unjustified. Similar view was taken by the Tribunal in the cases referred to by Ld. counsel for the appellants. In para-9 of the order in M/s.Philips Carbon Black Ltd. case (supra), the Tribunal as under : 9. The issue can be looked at from another angle as well. Rule 6(1) of the CCR interalia provides that cenvat credit shall not be made available in respect of inputs used in the manufacture and clearance of exempted goods. The reason being that there is no tax cascading requiring elimination in such a situation. Therefore, the said Rule 6(1) is clearly not aimed at revenue maximization but credit neutralization. Rule 6(2) and Rule 6(3) of the CCR are only aimed at securing compliance with the substantive provision contained in Rule 6(1) of the CCR where common inputs are used in the manufacture of a dutiable and exempted final product. Reversal of proportionate cenvat credit in respect of the common input ..... X X X X Extracts X X X X X X X X Extracts X X X X
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