Tribunal Allows Refund in Rupees, Credits for Security & Air Travel

The Tribunal held that the rejection of refund claims based on the receipt of export proceeds in Indian Rupees was not justified. Payments in Indian Rupees routed through foreign banks, supported by FIRCs, were deemed equivalent to convertible foreign exchange. The Tribunal also ruled in favor of admissibility of input service credit for security services and air travel services. Consequently, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

---

---

Issues Involved:
1. Rejection of refund claims based on the receipt of export proceeds in Indian Rupees instead of convertible foreign exchange.
2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005.
3. Admissibility of input service credit for security services and air travel services.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claims Based on Receipt of Export Proceeds in Indian Rupees:
The appellants filed refund claims for unutilized CENVAT credit on input services used for providing exported output services under Rule 5 of CENVAT Credit 2004 read with Notification No. 27/2012-CE dated 18.6.2012. The claims were rejected because the export proceeds were realized in Indian Rupees rather than in convertible foreign exchange. The appellants argued that the payments in Indian Rupees were permissible by the Reserve Bank of India and supported by the Certificate of Foreign Inward Remittances issued by their banker. They cited multiple Tribunal decisions affirming that payments received in Indian Rupees, routed through foreign banks, satisfy the requirement of convertible foreign exchange.

2. Compliance with Rule 3(2)(b) of Export of Service Rules, 2005:
The appellant's counsel contended that the rejection of refunds solely on the basis of receipt in Indian Rupees was contrary to judicial precedents. The Tribunal had consistently held that payments received in Indian Rupees through foreign banks should be treated as convertible foreign exchange. The Tribunal referenced several decisions, including BNY Mellon International Operations (I) Pvt. Ltd. vs. CCE, Pune-III, CST, Mumbai vs. M/s. PMI Organisation Centre Pvt. Ltd., and others, which established that Indian Rupees received from foreign banks meet the conditions of Rule 3(2)(b) of Export of Service Rules, 2005. The Tribunal also cited the Supreme Court judgment in J.B. Boda and Company, which supported the view that payments received in Indian Rupees through foreign banks are equivalent to convertible foreign exchange.

3. Admissibility of Input Service Credit for Security Services and Air Travel Services:
The Tribunal addressed the issue of admissibility of input service credit for security services and air travel services. It was noted that these issues were not raised in the show cause notice, and the denial of refund for these services was deemed incorrect. The Tribunal held that security services and air travel services have a direct nexus with the export services and are therefore admissible input services.

Conclusion:
The Tribunal concluded that the impugned orders rejecting the refund claims were not sustainable in law. It was determined that the payments received in Indian Rupees, when routed through foreign banks and supported by FIRCs, fulfill the condition of payment in convertible foreign exchange. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

Operative Portion:
The operative portion of the order was pronounced in Open Court on 18/09/2017.

---