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2015 (8) TMI 685 - CESTAT MUMBAI

2015 (8) TMI 685 - CESTAT MUMBAI - 2015 (40) S.T.R. 165 (Tri. - Mumbai) - 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. .....

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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 Export of Service Rules. - appellant has received the remittance in convertible foreign exchange.

Disallowance of .....

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voices for the same has been raised in the subsequent quarter - In respect 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 .....

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Mumbai-I. As the issues in appeals are common, they are being disposed of 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 .....

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f. 1.4.2012, which amounts to double claim. 2.1 The details of refund claim 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 49,34,10 .....

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n 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, being una .....

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rges that, as required under the provisions of Rule 3(2) of the Export of 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 invest .....

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acts that the reports are related to investments opportunity in India. Further, 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 fo .....

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14 ]. 5. The second issue is whether the appellant have received remittance 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. .....

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149,059,984.75. Further the purpose for remittance is stated as Payment under 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 author .....

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s by debit to the Asian Clearing Union dollar account in India of a bank of 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 co .....

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unt of a Bank situated in any foreign country other than a member country 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 .....

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ng that the said FIRC have not been adjusted against any invoice raised by 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 c .....

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plained that all the transactions are recorded in the Books of Account regularly 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 .....

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hority that the appellant received the payments some time after raising the 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 sh .....

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e of the staff of the appellant and also as regards the Rent-a-cab services 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 taxa .....

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contained in the final product or not. The crucial requirement, therefore, 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 .....

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nal product is not a standalone item. It has to be read in entirety and when 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, .....

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and to avoid such contingency the Legislature has incorporated the inclusive 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 entit .....

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the reverse of the invoice, it is pointed out that car hire rentals (rent-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 par .....

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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. 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 impu .....

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rned Counsel for the appellant that it is not a case of one time transaction. 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 receip .....

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pellant 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. 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 rejectin .....

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ble. 9.1 The learned Counsel for the appellant explains that there are no 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 an .....

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