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M/s. AGM India Advisors Pvt. Ltd. Versus Commissioner of Service tax, Mumbai-I

Rejection of Refund Claim – Management Consulting Services - Exported “Banking and other Financial Services”– Appellant contends that remittance against export of services was received in Indian Rupees but through foreign bank and have issued FIRC - CENVAT credit for Clearing services, Car Hire Charges, Professional charges for assisting in MIS reporting requirement are used for providing output services which has been exported thus qualifies as input services, credit is admissible.

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- Decided in favour of appellant. - APPEAL NO. ST/88437/14 - Dated:- 1-7-2015 - Mr. Ramesh Nair, Member (Judicial) Ms. Rinky Jassuja, Chartered Accountant : For the Appellants Shri A.B. Kulgod, Asstt. Commissioner (A.R.) : For the Respondent ORDER Per : Ramesh Nair This appeal is directed against Order-in-Appeal No. PD/ST-I/531/2014 dtd. 23/4/2014 passed by the Commissioner of Central Excise & Service Tax (Appeals-IV), Mumbai-I, wherein the Ld. Commissioner (Appeals) rejected the appeal .....

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efund claim, the department observed that the appellant have not received export proceeds in convertible foreign currency but received the same in Indian rupees only. The department also observed that the appellant have availed Cenvat credit on Clearing services (supply of plants), Car Hire Charges, Professional charges for assisting in MIS reporting requirement, service tax registration, IEC code, which according to the department were not used for providing output service. Further, the departm .....

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the Commissioner (Appeals) who rejected the appeal therefore appellant is before me. 3. Ms. Rinky Jassuja, Ld. Chartered Accountant appearing for the appellant submits that refund was rejected mainly on the ground that various remittance was received in Indian Rupees and the same was not received in convertible foreign exchange. She submits that the remittance against export of services was received though in Indian Rupees but through foreign bank i.e Bank of America and they have been issued FI .....

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Professional charges for assisting in MIS reporting requirement, service tax registration, IEC code, she submits that all these services are used for providing output services which has been exported therefore it qualifies as input services and the Cenvat credit is admissible consequently the refund of said Cenvat credit should not have been rejected on the ground that these are not input services. As regard classification dispute raised by the lower authority that they have exported the servic .....

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business consultant services and same has not been disputed therefore the services exported by them is management consultant services and not banking and financial services. Therefore dispute raised by the lower authority is not sustainable. 4. Shri A.B. Kulgod, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. 5. I have carefully considered the submissions made by both sides and perused the record. 6. I find in the present case fac .....

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Tribunal judgment in case of Sun-Area Real Estate Pvt Ltd (supra) wherein it was held as under: 5. I have carefully considered the submissions 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 deal .....

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n it). Since inward remittances received for opening of or credit of Non-Resident (External) accounts/FCNR accounts can be repatriated freely, 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 rupe .....

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d- (a) sell it to an authorised person in India in exchange for rupees; or (b) retain or hold it in account with an authorised dealer in India 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 e .....

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Deutsche Bank. Therefore, the said Indian rupee is nothing but foreign exchange repatriated from foreign country to India. Therefore, such payment 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 deale .....

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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 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 .....

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Clearing Union or Nepal or Bhutan) is a manner of receipt of foreign exchange. In the present case, as evident that the Indian rupees was received 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'b .....

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r is remitted (and expressed so) in dollars. It is common ground that the entire transaction effected through the media of the Reserve Bank of 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 thereaft .....

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in convertible foreign exchange. We are of the view that the income is received in India in convertible foreign exchange, in a lawful and permissible 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-ta .....

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whether the brokerage in Indian rupees retained by the Indian Insurance broker shall be treated as foreign exchange or otherwise. The hon'ble 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 .....

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vided that if the payment in India rupees is received in India through banking channel it is deemed to be convertible foreign exchange. 10. As regard the judgments relied upon by the learned counsel, I have gone through the same. However, same are need not be discussed, in view of my above discussion and the statutory provisions of the Foreign Exchange Management Act and hon'ble Supreme Court's judgment, I am of the considered view that even though the appellant received the payment in I .....

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t service credit in respect of security services and air travel services, first of all, this issue of admissibility as input service was not raised in the show cause notice. Therefore, denial of refund of ₹ 7,747/- and ₹ 1,051/-respectively is not correct. Secondly, the appellant is providing export services and for which they are using security services and air travel services, which in my view, has a direct nexus with the export services, accordingly the same are admissible input s .....

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