ST - Refund - In view of FEMA Notification, appellant's Bank have rightly received money in INR as RBI permits payment in rupee from account of Bank situated in any foreign country other than member country of Asian Clearing Union - Refund not deniable: CESTAT
By TIOL News Service
MUMBAI, AUG 18, 2015: THE appellants are a service provider exporting 100% of its service to one single client located outside India viz. Mauritius. The service is in the nature of Banking and other Financial Services. As per the agreement between the appellant and foreign client, the appellant is entitled to get remuneration on cost plus basis. As per the agreement, at end of every quarter, the appellant raised bill on their client. The appellant is providing advice, recommendations in the form of reports or investment memoranda with regard to suitable investment opportunities in India for the use of their client located abroad. Based on the report of the appellant, the client, who is located abroad, utilizes those reports for making investment decision and for further advice to the Fund managers located abroad, who are interested for investment in India.
As the appellant is an exporter of service and being unable to utilize the input service credit they preferred to file refund claims from time to time in terms of rule 5 of CCR, 2004 read with Notification No. 5/06-CE dated 14.3.2006.
Out of the total refund claimed of Rs.80.08 lakhs, the original authority sanctioned an amount of Rs.30.74 lakhs and rejected an amount of Rs.49.34 lakhs.
The appellant is before the CESTAT.
The issues which arise are-
(A) Whether the service exported is used outside India as required under the provisions of Rule 3(2) of the Export of Service Rules, 2005.
(B) Whether the consideration for service exported have not been received in convertible foreign exchange.
(C) No correlation between export invoices and FIRC
(D) Whether Rent-a-Cab service for staff and life insurance for staff is allowable as input service.
(E) Whether receipt (foreign remittance) can be claimed on the basis of service provided during the refund period, although invoice was raised after the quarter, when service was rendered.
(F) Whether rejection of refund is justified on the ground that the export invoices for service which were raised for the previous quarter in the next quarter i.e. for January - March, 2012 in the next quarter April-June, 2012, rebate has been claimed w.e.f. 1.4.2012, which amounts to double claim.
After considering the submissions made by both sides, the Bench observed & held thus -
+ As the reports have been exported and the same have been utilized outside India, and remuneration for the services have been received in convertible foreign exchange, the appellant satisfied both the conditions under Rule 3(2) (a) & 9b) of the Export of Service Rules, 2005. Accordingly, I hold that it is export of service. I further hold that it is immaterial how the foreign client utilizes the reports prepared by the appellant. Similar view has been taken by this Tribunal in the case of N.V. Advisory Pvt. Ltd. - 2013-TIOL-2029-CESTAT-MUM and Bain Capital Advisory Services - 2015-TIOL-1035-CESTAT-MUM.
+ In view of Notification No. FEMA/14/2000-RB dated 3.5.2000 under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 issued by Reserve Bank of India, Exchange Control Department, under Rule 3 [Manner of Receipt in Foreign Exchange], Table Sr. no. 2 the appellant's Bank at Mumbai have rightly received the money in Indian rupees as RBI permits payment in rupee from the account of a Bank situated in any foreign country other than a member country of Asian Clearing Union. Thus, the foreign remittance is in order.
+ On the issue as to whether there is correlation between the export invoices and the FIRC (remittance) it is explained by the appellant that they are providing the export of service to only one client and all remittances are received from the same client and the whole billing is to the same client. The appellant undertakes to provide the re-calculation and details of the bills raised. Hence, on this issue, I remand the matter to the adjudicating authority, who shall after allowing the opportunity of hearing and perusing the evidences produced till the date of hearing before him, will examine the correlation of bills with FIRC. In case it is found that the appellant have received the remittance for the bills raised, the claim of the refund cannot be rejected. The remittance may be received either prior to the bills raised or post billing.
+ In view of the fact that cost incurred with respect to car hire rental and insurance premium paid for the staff, form part of the cost for which bills have been raised in the quarter and remittance have been received by the appellant assessee, for providing the output service, I hold that these two services in question are eligible input service.
+ Commissioner (Appeals) is in error in considering one to one correlation and/or correlation with the bills raised for the each receipt or bill period. In view of the admitted fact that appellant is a 100% exporter and all its output services are exported to a single client located abroad and all the payments are received from the same client, this issue is decided in favour of the appellant.
+ In the facts and circumstances there is no simultaneous claiming of refund and rebate for the same invoices, as the invoices referred in the impugned order, admittedly relates to refund period.
The appeal was partly allowed.
(See 2015-TIOL-1718-CESTAT-MUM)
