The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has dismissed a department’s appeal challenging refund claims relating to service tax and cess paid on input services used for exported services, holding that the date of receipt of foreign exchange is the relevant date for determining the limitation period.
The Bench of S.K. Mohanty (Judicial Member) and Sanjiv Srivastava (Technical Member) upheld the order of the Commissioner (Appeals) and placed particular emphasis on Rule 6(3A) of the Service Tax Rules.The export of services would be completed only upon receipt of foreign exchange, as reflected in the Foreign Inward Remittance Certificate (FIRC).
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The principal issue before the Tribunal was the determination of the “relevant date” for filing a refund claim concerning service tax paid on input services used in the export of services.
The dispute arose from two refund claims filed under Notification No. 39/2012-ST dated June 20, 2012. The claims covered the periods July 2012 to March 2013 and April 2013 to September 2013, amounting to Rs. 52,26,602 and Rs. 17,68,160 respectively. The total refund claimed was Rs. 69,94,762.
The original adjudicating authority had rejected both claims under Notification No. 39/2012 read with Section 11B of the Central Excise Act, 1944, as made applicable to service tax under Section 83 of the Finance Act, 1994.
The matter subsequently reached the Commissioner (Appeals), who allowed the claims. The appellate authority held that, in the case of exported services, the relevant date for computing the limitation period was the date on which foreign exchange was received by the service provider.
The appellate authority relied on judicial precedents including decisions in Spec India, Bechtel India Pvt. Ltd., and Scionspire Consulting Services (I) Pvt. Ltd. It also noted that where payment for services had been received in advance, the invoice date could be relevant.
The department challenged the appellate decision, principally contending that the refund claims related to periods preceding Notification No. 14/2016-CE (NT) dated March 1, 2016.
According to the department , the notification amended the earlier provisions and had prospective effect. It argued that the Commissioner (Appeals) had incorrectly treated the 2016 notification as clarificatory and effectively applied it to earlier refund claims.
The department argued that reliance on the Tribunal’s decision in Spec India was inappropriate because that decision had been challenged before the Gujarat High Court and the proceedings had not attained finality.
The Tribunal observed that the issue was covered by the Ahmedabad Bench’s decision in Spec India. While acknowledging that the decision had been challenged before the Gujarat High Court, the Bench noted that there was no material on record showing that the High Court had stayed the Tribunal’s order.
The Bench also noted that the Commissioner (Appeals) had relied on earlier decisions holding that the relevant date for refund claims concerning exported services was the date of receipt of foreign exchange. These included the Tribunal’s rulings in Bechtel India Pvt. Ltd. and Scionspire Consulting Services (I) Pvt. Ltd.
Significantly, the Revenue did not challenge this particular finding or the decisions relied upon by the Commissioner (Appeals).
Having accepted the foreign-exchange receipt date as the relevant date, the Tribunal concluded that the refund claims had been filed within the limitation period prescribed under Section 11B, read with Notification No. 39/2012-ST.
The Bench accordingly found no merit in the Revenue’s appeal and upheld the order granting the refund relief.
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