CA Bimal Jain
Remittance against export of services received in Indian Rupees but through foreign bank is deemed to be received in convertible foreign exchange – Export condition stands satisfied
AGM India Advisors Pvt. Ltd. (the Appellant) had exported management consultantacy services without payment of Service tax under Rule 4 of the erstwhile Export of Service Rules, 2005. As the Appellant was not in a position to utilize the Cenvat Credit availed by them, refund claim of Rs. 17,66,363/- was filed. The Department denied refund to the Appellant on the ground that the Appellant has not received export proceeds in convertible foreign currency but received the same in Indian rupees only.
The Hon’ble CESTAT, Mumbai relying upon the judgment in the case of Sun-Area Real Estate Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai-I [2015-TIOL-956-CESTAT-MUM] & Hon’ble Supreme Court’s judgment in the case of J.B. Boda and Company and in terms of Regulation 3 of Notification No. FEMA 14/2000-RB dated May 3, 2000 issued by Reserve Bank of India under Section 47 of the FEMA, held that since the Appellant has received the payment in Indian rupees but through a Foreign Bank who has issued Foreign Inward Remittance Certificate, the same is deemed to be convertible foreign exchange and accordingly, the condition as provided under Rule 3(ii) of the erstwhile Export of Service Rules, 2005 stand complied with. Hence, the Department cannot deny the refund claim on this ground.
Our Comments: Effective from July 1, 2012, the erstwhile Export of Service Rules, 2005 has been replaced by Rule 6A of the Service Tax Rules read with Rule 6(8) of the Cenvat Rules. In terms of Rule 6A (1) of the Service Tax Rules, the six essential requisite conditions to be fulfilled for a service to be considered as export of service are mentioned here under:
1. the provider of service is located in the taxable territory;
2. the recipient of service is located outside India;
3. the service is not a service specified in Section 66D of the Finance Act;
4. the place of provision of the service is outside India (determined as per the POP Rules);
5. the payment for such service has been received by the provider of service in convertible foreign exchange, and
6. the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Finance Act.
Since, the condition of receiving payment under convertible foreign exchange still exists even after July 1, 2012, the relevance of afore-stated judgment will still holds good.