Convertible foreign exchange treatment accepted for rupee receipts routed through foreign banking channels with FIRCs and banking trail.

Receipt of service consideration in Indian rupees through a bank channel outside India, supported by Foreign Inward Remittance Certificates and banking records, was treated as receipt in convertible foreign exchange for refund or export benefit purposes. The Tribunal focused on the substance of the remittance rather than the currency label alone, and accepted that repatriated funds routed through foreign exchange channels can satisfy the regulatory requirement even without a separate formal conversion step. The absence of foreign currency notation on the certificates did not defeat the claim where the remittance trail showed receipt through banking channels. Relief was therefore available on the basis that the receipt qualified as convertible foreign exchange.

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Issues: Whether receipt of service consideration in Indian rupees through a foreign bank channel, supported by Foreign Inward Remittance Certificates, can be treated as receipt in convertible foreign exchange for the purpose of refund / export benefit.

Analysis: The dispute turned on the character of the remittance rather than the currency denomination alone. The Tribunal followed the earlier decision relied upon in the remand order and held that where Indian rupees are received through a bank situated outside India and credited through banking channels, the receipt represents repatriated foreign exchange in terms of the foreign exchange regulations. The issuance of FIRC, coupled with the banking trail and the absence of any foreign currency notation on the certificates, supported the conclusion that the remittance was in convertible foreign exchange. The Tribunal also relied on the principle that substance prevails over form and that a formal two-step conversion is not necessary where the transaction is, in effect, routed through foreign exchange channels.

Conclusion: Receipt of the amount in Indian rupees through the foreign banking channel was held to be receipt in convertible foreign exchange, and the appellants were entitled to relief.

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