Convertible foreign exchange test for export refund satisfied where rupee remittance routed through foreign bank and backed by FIRC.

Receipt of export consideration in Indian rupees through a foreign banking channel, supported by FIRC and covered by the FEMA repatriation framework, was treated as receipt in convertible foreign exchange for refund eligibility under the Export of Service Rules, 2005. The Tribunal also held that refund could not be denied on alleged inadmissibility of input services where the objection was not raised in the show cause notice and the services, including security and air travel services, had a direct nexus with the exported output services. On that basis, rejection of the refund claims was unsustainable and consequential relief followed.

---

---

Issues: (i) Whether receipt of export proceeds in Indian rupees routed through a foreign bank and supported by FIRC satisfies the requirement of receipt in convertible foreign exchange under the Export of Service Rules, 2005 for refund entitlement; (ii) Whether refund could be denied in respect of input services on the ground of inadmissibility when such objection was not raised in the show cause notice and the services had nexus with exported output services.

Issue (i): Whether receipt of export proceeds in Indian rupees routed through a foreign bank and supported by FIRC satisfies the requirement of receipt in convertible foreign exchange under the Export of Service Rules, 2005 for refund entitlement.

Analysis: The refund claim was rejected only because the consideration was received in Indian rupees. The Tribunal noted that the remittances were routed through a foreign bank, FIRCs were issued by the bank, and the FEMA framework treated such rupee receipt from a foreign bank account as repatriated foreign exchange. Reliance was placed on the consistent line of Tribunal decisions and the governing FEMA notifications to hold that receipt in Indian rupees in these circumstances is deemed receipt in convertible foreign exchange.

Conclusion: The condition of receipt in convertible foreign exchange stood satisfied, and rejection of refund on this ground was unsustainable.

Issue (ii): Whether refund could be denied in respect of input services on the ground of inadmissibility when such objection was not raised in the show cause notice and the services had nexus with exported output services.

Analysis: The Tribunal found that the objection regarding security services and air travel services was not taken in the show cause notice. It further held that, on the facts, these services had a direct nexus with the export activity and were admissible input services for refund purposes.

Conclusion: Denial of refund on the ground of inadmissibility of these input services was not justified.

Final Conclusion: The impugned orders were set aside and the refund claims were allowed, with the appellant entitled to consequential relief.

Ratio Decidendi: Receipt of export consideration in Indian rupees through a foreign banking channel, supported by FIRC and covered by the FEMA repatriation framework, can constitute receipt in convertible foreign exchange for refund eligibility under the export service refund scheme.

---