Convertible foreign exchange condition for export-service refund accepted where rupee receipts were routed through foreign banking channels with FIRC support.

Receipt of service consideration in Indian rupees routed through a foreign bank and supported by FIRC was treated as receipt in convertible foreign exchange for refund purposes under Rule 5 of the CENVAT Credit Rules, 2004 read with the Export of Service Rules, 2005. The settled FEMA-based position applied was that routing through banking channels from abroad can satisfy the foreign exchange condition despite payment being reflected in rupees, so refund could not be denied on that ground. Denial of refund for security and air travel services was also unsustainable because the objection was not raised in the show cause notice and both services had a direct nexus with the exported output services.

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Issues: (i) Whether receipt of service consideration in Indian rupees routed through a foreign bank and supported by FIRC satisfies the requirement of receipt in convertible foreign exchange for refund under Rule 5 of the CENVAT Credit Rules, 2004 read with the Export of Service Rules, 2005. (ii) Whether denial of refund in respect of input services such as security services and air travel services was sustainable.

Issue (i): Whether receipt of service consideration in Indian rupees routed through a foreign bank and supported by FIRC satisfies the requirement of receipt in convertible foreign exchange for refund under Rule 5 of the CENVAT Credit Rules, 2004 read with the Export of Service Rules, 2005.

Analysis: The receipt of Indian rupees was found to be through banking channels from abroad and covered by FIRC. The decision relied on the settled view that mere receipt in Indian rupees does not negate receipt in convertible foreign exchange when the remittance is routed through a foreign bank and the FEMA framework treats such receipt as repatriated foreign exchange. The Tribunal applied the FEMA notifications and the consistent appellate precedent to hold that the condition under the Export of Service Rules stood satisfied.

Conclusion: The issue was decided in favour of the assessee; receipt in Indian rupees in the stated circumstances was treated as receipt in convertible foreign exchange, and refund could not be denied on that ground.

Issue (ii): Whether denial of refund in respect of input services such as security services and air travel services was sustainable.

Analysis: The Tribunal found that the objection regarding admissibility of these input services was not raised in the show cause notice. It also found that both services had a direct nexus with the exported output services and were therefore eligible for refund-related CENVAT credit treatment.

Conclusion: The issue was decided in favour of the assessee; the denial of refund on this ground was unsustainable.

Final Conclusion: The impugned order was set aside to the extent it rejected the refund claim, and the appeals were allowed with consequential relief.

Ratio Decidendi: Where export proceeds are received through banking channels from abroad and the remittance is supported by FIRC, receipt of consideration in Indian rupees may still constitute receipt in convertible foreign exchange for export-service refund purposes under the FEMA framework and the Export of Service Rules, 2005.

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