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M/s Mount Kellett Management (I) Pvt. Ltd. Versus Commissioner of Service Tax, Mumbai-I

Denial of refund claim - Export of services - Unutilized CENVAT Credit - whether the service provided from India were used outside India - Held that:- 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, it is export of service. It is immaterial how the foreign cli .....

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he buyer of service and thereafter Bank converted it in INR and diverted the said INR to their branch in India. The whole mode of payment is as per the RBI guidelines, the learned Commissioner (Appeals) is in error in concluding that the remittance had not been received in foreign exchange under the Export of Service Rules. - appellant has received the remittance in convertible foreign exchange.

Disallowance of input service of life insurance premium and Rent-a-cab services - cost inc .....

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of the refund claimed for the period November, 2011 to March, 2012, the refund claim filed on 30.10.2012 based on the invoices dated 9.1.2012, 14.6.2012 and 31.8.2012. The period of refund was up to March, 2012 and therefore, the invoices raised at later date cannot be considered and accordingly, the learned Commissioner (Appeals) held that the adjudicating authority has correctly rejected the refund claim on this account. - Decided partly in favour of assessee. - Appeal No. ST/818/12, ST/88435 .....

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together for sake of convenience. 2. The issues which arise in these appeals 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 receip .....

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m are as under:- Sr. No. Appeal No. Period Amount claimed (in INR) Amount Sanctioned (in INR) Amount Rejected (in INR) 1. ST/818/12 Nov 08 to Mar 09 18,15,726 NIL 18,15,726 2. ST/88435/14 Apr 09 to Sep 09 16,15,704 NIL 16,15,704 Oct 09 to Mar 10 18,44,079 18,03,490 40,589 3. ST/88436/14 Apr 10 to Sep 10 13,88,751 9,68,012 4,20,739 4. St/88438/14 Nov 11 to Mar 12 1344016 3,02,672 10,41,344 TOTAL 80,08,276 30,74,174 49,34,102 3. The appellants are service provider, exporting 100% of its service be .....

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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, being unable to utilize the input service credit on the various input services util .....

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Service Rules, 2005 they have provided the services from India, as they have prepared the reports in India and sent to their client located in Mauritius. The report has been used by their client located outside India for further advising the clients of MKML and as such they satisfy the condition for export of service. It is further urged that the receiver of services abroad utilizes the reports (services) for making investment decisions for investing in India. However, it is immaterial how the f .....

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ther, reference was made in the impugned order, to the agreement between the appellant and their clients which provides that the appellant was appointed for the purpose of advising and making recommendations on the investment opportunities etc. in India. 4.2 Having considered the rival contentions on this issue, I hold that 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 app .....

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e in convertible foreign exchange. The Assistant Commissioner in Order-in-Original dated 5.8.2008 has observed that the appellants have received all the export proceeds in Indian Currency only. 5.1 The learned Counsel for the appellant urges that this observation of the adjudicating authority is erroneous and further learned Commissioner (Appeals) has also erred and accepted the findings. He has produced a copy of FIRC No. 2009030964, which is at Sr. No. 4 in the table at page 3 of the Order-in- .....

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nder Sub-Advisory Agreement'. The learned Counsel further explained that under the Notification No. FEMA/14/2000-RB dated 3.5.2000 under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000, it has been provided by the Reserve Bank of India, Exchange Control Department, under Rule 3 as follows:- "Manner of Receipt in Foreign Exchange:- (1) Every receipt in foreign exchange by an authorized dealer, whether by way of remittance from a foreign country (other th .....

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f the member country in which the other party to the transaction is resident or by credit to the Asian Clearing Union dollar account of the authorized 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 per .....

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of Asian Clearing Union. Thus, the foreign remittance is in order. 5.2 The learned Counsel further explained that the modus operandi of the Bank is, if a Bank received foreign currency abroad from the buyer of service and thereafter Bank converted it in INR and diverted the said INR to their branch in India. The whole mode of payment is as per the RBI guidelines, the learned Commissioner (Appeals) is in error in concluding that the remittance had not been received in foreign exchange under the E .....

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them. Hence, no remittance against the export invoices raised in the relevant period have been received by them, so no export of service is involved in the case, although the Service Tax paid by the appellant is in order, but no refund claim is eligible. 6.1 The learned Counsel for the appellant explained that according to their business model or practice, they are providing service constantly during each month to their client located abroad. For providing such services, they keep receiving and .....

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ularly maintained in the ordinary course of business. The Books of Account are also subject to audit by the Chartered Accountant for further check up. The Revenue authorities have not found that no payments have been received against the bills raised for export of services. The Revenue authorities have failed to make efforts to tally the invoices with the remittance. The learned Counsel further relies on the finding in the Order-in-Original dated 5.8.2010 for the period Nov. 08 to March, 09, whe .....

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e invoices and in some case partly by way of advance. It is further 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 p .....

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s availed for the travel of the staff of the appellant. In the impugned order it has been held that these expenditures are in nature of welfare activities of the appellants and in no way connected with the export of services provided by them. Reference was made to rule 2(l) of the Cenvat Credit Rules, 2004 and it was concluded that CENVAT Credit on input service can be allowed only if the same is used by a provider of taxable service for providing an output service and not otherwise. Reliance wa .....

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, is that all goods used in or in relation to the manufacture of final products qualify as input . This presupposes that the element of manufacture must be present. 7.1 The other ruling relied upon of the Apex Court in the case of Commissioner of Central Excise, New Delhi Vs. Ballarpur Industries Ltd. -(1989) 4 SCC 566, wherein with respect to the difference between the expression used in the manufacture and used as input (raw material) was highlighted. In that judgment, it was held that undoubt .....

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en so read, it reads as used in or in relation to the manufacture of final product whether directly or indirectly and whether contained in the final product or not. 7.2 The input Counsel for the appellant states that the expenses are in the nature of payment of premium to secure life of the appellant and to provide conveyance to the staff by availing the rent-a-cab service, which are part of its business cost. Accordingly, it is an input for output service. As regards the expenditure on part of .....

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ive part after the substantive part, qualified by the place of use. For example, one of the categories mentioned in the inclusive part is used as packing material . Packing material by itself would not suffice, till it is proved that the item is used in the course of manufacture of final product. Mere fact that the item is a packing material value of which is included in the assessable value of final product will not entitle the manufacturer to take credit. Oils and lubricants mentioned in the d .....

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-a-cab) and life insurance premium for staff, are expenses, which have also been included in the operating expenses incurred, and on such total expenses, the appellant have added mark up as per the agreement and raised the bills on the principal (service receiver). As such, even on the facts, the said costs have been accepted by their clients for providing their output services and the same have been used for providing part of the output services, as such the disallowance of the same is bad. 7.5 .....

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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. 8. The next issue is whether refund can be claimed on the basis of services provided during the refund period but the invoices for the same has been raised in the subsequent quarter. In the impugned order, it is observed that in respect of the refund claimed for the p .....

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on. They are regularly raising the invoices, which is evident from the facts recorded by the learned Commissioner (Appeals), as for the period Nov. 11 to March, 12 they have raised three invoices, first in January, 12, second in June, 12 and third in August, 12 for the services rendered during the period. The scheme of refund under Notification No. 5/06-CE, no where provides that claim period should be same for both receipt of input service as well as billing for output services and/or export of .....

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ingle client located abroad and all the payments are received from the same client, this issue is decided in favour of the appellant. I have already remanded the issue of correlation of the remittances and invoices. 9. The last issue in these appeals is whether invoice for the period January to March, 12, which was raised subsequently during the subsequent quarter April to June, whether the Revenue is justified in rejecting the claim stating that as the rebate was claimed for the period April, 1 .....

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such fact obtaining and the learned Commissioner (Appeals) is in error in observing so. It is explained that the CENVAT Credit is availed till 31.3.2012, as the services have been exported and accordingly they have claimed refund. It is immaterial when the invoices are raised and/or when the remittance is received. The same may be in the subsequent period. It is further contended that it is not the case where the refund and rebate have been claimed for the same invoices, as claimed in the earlie .....

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