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2015 (5) TMI 885 - CESTAT MUMBAI

2015 (5) TMI 885 - CESTAT MUMBAI - 2015 (39) S.T.R. 897 (Tri. - Mumbai) - Denial of refund claim - Payment received in export of service in Indian rupees from Deutsche Bank - Held that:- FIRCs were issued and there is a specific certification that the payment has not been received in non-convertible rupees, which establishes that the payment received and mentioned in the FIRCs are other than non-convertible foreign exchange, in other words, the payment is in convertible foreign exchange. - out o .....

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efund of ₹ 7,747/- and ₹ 1,051/-respectively is not correct. - impugned order deserves to be modified inasmuch as the impugned order in respect of ₹ 1,64,081/- is upheld and the order rejecting refund of an amount of ₹ 10,98,077/- is set aside - Decided in favour of assessee. - Appeal No. ST/88549/2014 - Final Order No. A/1078/2015-WZB/SMB - Dated:- 16-4-2015 - Ramesh Nair, Member (J),J. For the Appellant : Shri Prasad Paranjape, Adv. For the Respondent : Shri A B Kulgod, .....

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7/- and ₹ 1,051/- was also rejected in respect of security services and air travel services respectively on the ground that these services have no nexus with the Export of Services. However, an amount of ₹ 1,64,081/- was held to be admissible, if otherwise in order. 2. The issue involved in the present case is that the appellant against export of service, received payment for the services in Indian rupees from Deutsche Bank and FIRCs issued by the bank has been produced before the lo .....

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the appellant has not received the service charges from overseas entity in convertible foreign exchange whereas the payment was received in Indian rupees, the condition of Rule 3(2) of Export of Service Rules, 2005 was not complied with and accordingly the services will not be treated as export of services. Therefore, the appellant is not entitled for the refund. 3. Shri Prasad Paranjape, learned counsel for the appellant submits that though the payment for the export services were received in I .....

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me is received in convertible foreign exchange from abroad through banking channel. Therefore, it cannot be said that merely because the payment was received in Indian rupees it is not a convertible foreign exchange. He referred to Exchange Control Manual wherein the issuance of such FIRC is statutorily provided in the case of receipt or remittance of foreign exchange. As per Clause 3A.6 of Exchange Control Manual of RBI, according to which the FIRC is issued in respect of remittance of foreign .....

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receives in India, payment in rupees from the account of the bank or any exchange house situated in any country outside India, maintained with authorised dealer, the said person shall be deemed to have repatriated the realized foreign exchange to India. This establishes that even though the payment was received in Indian rupees but since the remittance has come from the country outside India and it was through the account of a bank, in the present case, it is Deutsche Bank, who is the authorise .....

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ement Act, clearly provides that when the payment against any export is received even in Indian rupees, but through authorised dealer, the payment/remittance should be considered as foreign exchange. 3.3. He placed reliance on the hon'ble Supreme Court judgment in the case of J.B. Boda and Company Private Lid, vs. Central Board of Direct Taxes AIR 1997 SC 1543 wherein it was held that the payment towards insurance brokerage retained by the Indian agent from the total payment of premium to be .....

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) STR 156 (Tri.-Del.) ; (iii) Nipuna Services Ltd. vs. Commissioner of Central Excise, Customs & Service Tax, 2009 (14) STR 706 (Tri.-Bang.) 4. On the other hand, Shri A.B. Kulgod, Asstt. Commissioner (AR), appearing on behalf of Revenue, reiterates the findings of the impugned order. He further submits that the Rule 3(ii) of Export of Service Rules, 2005 provided a condition that payment for service exported is received in convertible foreign exchange Since in the present case, the payment .....

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made by both the sides. It is not in dispute that the remittance towards the payment of service was received in Indian rupees. However, though the payment is received in Indian rupees but the bank has issued "Foreign Inward Remittance Certificate". Clause 3A.6(i) of the Exchange Control Manual is reproduced below: "3A.6 (i) Authorised dealers should issue certificates in form BCI against receipt of inward remittances or realisation of foreign exchange on security paper if the amo .....

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authorised dealers should not issue certificates against such remittances." 6. From the above provision it is clear that Foreign Inward Remittance Certificate (FIRC) is issued only in respect of foreign exchange. In the present case, FIRCs were issued and there is a specific certification that the payment has not been received in non-convertible rupees, which establishes that the payment received and mentioned in the FIRCs are other than non-convertible foreign exchange, in other words, the .....

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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 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 authorised dealer." From the sub-para (2) of para 4 above it is ve .....

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ment in rupees is equal to the foreign exchange. The manner of receipt of foreign exchange is provided under Notification No. FEMA 14/2000-RB dated 03/05/2000 issued by Reserve Bank of India. Regulation No.3 of the said Notification is reproduced below: 3. Manner of Receipt in Foreign Exchange:- (1) Every receipt in foreign exchange by an authorised dealer, whether by way of remittance from a foreign country (other than Nepal and Bhutan) or by way of reimbursement from his branch or corresponden .....

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by credit to the Asian Clearing Union dollar account of the authorised dealer maintained with the correspondent bank in the member country; and b) payment in any permitted currency in all other cases (2) all countries other than those mentioned in (1). a) payment in rupees from the account of a bank situated in any country other than a member country of Asian Clearing Union or Nepal or Bhutan; or b) payment in any permitted currency (2) In respect of an export from India, payment shall be recei .....

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ved thru the account of Deutsche Bank which is situated in foreign country. Therefore, in terms of Regulation 3 made under Section 47 of the Foreign Exchange Management Act, 1999, in the present case the foreign remittance in Indian rupees through Deutsche Bank is the receipt of payment in convertible foreign exchange. 8. I have gone through the hon'ble Supreme Court's judgment in the case of J.B. Boda and Company (supra) wherein it was held that: "12. The facts brought out in this .....

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India is expressed in foreign exchange and in effect the retention of the fee due to the appellant Is dollars for the services rendered. This, according to us, is receipt of income in convertible foreign exchange. It seems to us that a "two way traffic", is unnecessary. To insist on a formal remittance to the foreign reinsures first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and a meaningless ritual, on the facts of this case. On a p .....

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ssible manner through the premier institution concerned with the subject-matter - the Reserve Bank of India. In this view, we hold that the proceedings of the Central Board of Direct Taxes dated 11.3.1986, declining to approve the agreements of the appellant with M/s Sedgwick offshore Resources Ltd. London for the purposes of section 80-0 of the Income-tax Act, are improper and illegal. We declare so. we direct the respondent to process the agreements in the light of the principles laid down by .....

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le Supreme Court has held that the said amount of brokerage retained by the Indian insurance broker from the total amount due to the foreign insurer shall be treated as foreign exchange. In view of the above judgment, I am of the view that when a foreign bank is maintaining Indian rupees in their account obviously, such Indian rupees was obtained in lieu of foreign exchange. For example, if any payment is made from India to any foreign country, it is to be made in foreign exchange and thus there .....

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