Custom, Excise & Service Tax Tribunal
Ms Fives India Engineering And Projects ... vs Commissioner Of Gst&Amp;Cce(Chennai ... on 13 August, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/40226/2019
[arising out of Order-in- Appeal No.26/2019 (CTA-I), dated 17.01.2019
passed by the Commissioner of GST & CE (Appeals-I), Chennai]
M/s. FIVES INDIA ENGINEERING & APPELLANT
PROJECTS PVT. LTD.
VTB Centre, 3rd Floor, No.7 South Boag Road,
Thyagaraya Nagar, Chennai - 600 017.
Versus
COMMISSIONER OF CGST & CE, RESPONDENT
Chennai North Commissionerate, Chennai - 600 034.
Appearance:
For the Appellant Shri N. Viswanathan, Adv. For the Respondent Shri K. Veerabhadra Reddy, ADC (AR) CORAM:
Hon'be Smt. Sulekha Beevi C.S, Member (Judicial) Date of hearing/decision 13-08-2019 FINAL ORDER NO.41027/2019 Brief facts are that the appellants who are registered with the service tax department filed a refund claim on 06.01.2017 for refund of service tax paid from Jun.'15 to 03.07.2016 on Man-power Recruitment Supply Agency Services provided outside India. The refund claim was returned to the appellants indicating certain defects. 2
ST/40226/2019 The refund was, thereafter, re-submitted on 03.07.2017. Show-cause notice was issued to the appellants on three grounds:-
Firstly, alleging that the refund claim is time-barred when computed from the date of re-submission, which is 03.07.2017;
Secondly, that the appellants have not fulfilled the condition under Rule 6A of the Service Tax Rules, 1994 in regard to the export of services inasmuch as, the consideration for the services was not received in foreign currency; and Thirdly, that the refund claim is hit by the doctrine of Unjust Enrichment.
After due process of law, the original authority rejected the refund claim, which was upheld by the Commissioner (Appeals). Hence this appeal.
2. On behalf of the appellant, the learned counsel Shri N. Viswanathan appeared and argued the matter.
With regard to the first issue of rejecting the refund claim as being time-barred, he submitted that the date of submitting the refund claim initially was 06.01.2017. The claim was returned for rectifying the defects and, therefore, the date of re-submission cannot be reckoned as the date for computing the period of limitation. To support the arguments, he relied upon the decision of the Hon'ble Gujarat High Court in the case of M/s.United Phosphorus Ltd. Vs Union of India reported in 2005 (184) E.L.T.240 (Guj.). Alternatively, the learned counsel argued that service tax was paid under mistake and, therefore, the time-limit prescribed under section 11B will not apply. The appellant had paid service tax on services that is not taxable / exempted from payment of service tax. Thus when service tax is paid 3 ST/40226/2019 under mistake, the time-limit prescribed under the law cannot be pressed into application for rejecting the refund claim. To support this argument, he relied upon the decision of the jurisdictional High Court in the case of M/s. 3E Infotech Vs CESTAT, Chennai reported in 2018 (18) G.S.T.L.410 (Mad.) as well as the decision of the Hon'ble High Court of Kerala in the case of M/s. Geojit BNP Paribas Financial Services Ltd. Vs CCE, CUS. & ST, Kochi reported in 2015 (39) S.T.R.706 (Ker.).
With regard to the second issue of rejecting the refund claim in not fulfilling the condition under Rule6A of Service Tax Rules, the learned counsel explained that the services were rendered outside India. The appellant had received the consideration by adjustment in their account in Indian currency. In fact, such payment ought to be considered as received in foreign currency since the remittances are adjusted in the accounts of service recipients and service provider being the group company. To support this argument, he relied upon the decision in the case of M/s. Mitsubishi Heavy Industries India Pvt. Ltd., Vs Central Excise, Delhi-II reported in 2017 (5) G.S.T.L. 321 (Tri.-Del.) and also in the case of M/s. Sun-Area Real Estate Pvt. Ltd., Vs Commissioner of Service Tax, Mumbai-I reported in 2015 (39) S.T.R.897 (Tri.-Mumbai).
The third ground for rejection of refund claim was that the refund is hit by unjust enrichment. The learned counsel submitted that the appellant received the consideration by issuing debit notes. Though service tax was mentioned in the debit notes, it was not paid by the group company abroad. The appellants had received only the value of the services. He adverted to the debit notes as well as the 4 ST/40226/2019 overseas bank statement to bring to light that the bank statements would show that element of service tax was not paid by the group company abroad. He thus argued that the service tax paid has not been passed on to the service recipient. It is also argued by learned counsel that being export of services, there is no basis for rejecting the refund claim as being hit by unjust enrichment.
3. The learned Authorised Representative for the Revenue Shri K. Veerabhadra Reddy, ADC (AR) supported the findings in the impugned order. He emphasized on the discussions made in paragraphs 10.5 to 10.8 of the Order-in-Original.
With regard to the first issue of the refund claim being time- barred, the learned Authorised Representative submitted that the date of re-submission ought to be reckoned as the date for computing the period of limitation. To support this argument, he relied upon the decision in the case of M/s. Madhu India Deco Ltd., Vs Commissioner of Central Excise & Service Tax, Lucknow reported in 2019 (24) G.S.T.L. 373 (Tri.-All.). Countering the argument of the learned counsel that the period of limitation prescribed under section 11B is not applicable for the tax paid under mistake, the learned Authorised Representative submitted that if the tax is paid under mistake of law, the period of limitation under General Clause Act could be applicable. To support his argument, he relied upon the decision in the case of M/s. Mafatlal Industries Ltd. Vs Union of India reported in 1997 (89) E.L.T.247 (S.C.) as well as the decision in the case of Collector of Central Excise, Chandigarh Vs M/s. Daoba Co-operative Sugar Mills reported in 1988 (37) E.L.T.478 (S.C.).
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ST/40226/2019 The learned Authorised Representative submitted that the appellant is taking a double stand by stating that the service tax is paid under mistake of law and that the refund claim has been filed as the services are exported. If the refund claim is filed on the ground that the services are being exported, the appellant has to fulfill all the conditions stated in Rule 6A of Service Tax Rules. In the present case, the consideration has not been received in convertible foreign exchange and, therefore, it cannot be stated that the services have been exported. Thus, the appellants have not fulfilled the conditions and is not eligible for the refund.
The third issue with regard to unjust enrichment was countered by the learned Authorised Representative stating that in the debit notes, the appellants had included the element of service tax.
4. Heard both sides.
5. As already narrated above, the refund was rejected on three grounds.
5.1 Firstly, that the refund claim was resubmitted on 03.07.2017 and therefore is barred by limitation. Undisputedly, the refund claim was initially filed on 06.01.2017. The department has returned the refund claim intimating defects in the same. While doing so, the department has not mentioned the period by which the defects can be rectified and the refund claim can be resubmitted. The appellants have rectified the defects and resubmitted the refund claim on 03.07.2017. Therefore, the date on which the refund claim was originally submitted has to be taken as the date for computing the period of limitation. This apart, the Hon'ble Jurisdictional High Court in the case of M/s. 3E Infotech (supra) has categorically held that the 6 ST/40226/2019 period of limitation prescribed in section 11B will not applicable for the service tax paid under mistake. In the present case, the appellants paid service tax on service which is not taxable as per the provisions of law. Thus, when the tax has been paid under a mistake the period of limitation prescribed under section 11B cannot be applied as held by the jurisdictional High Court in the case of M/s. 3E Infotech (supra). For these reasons, I hold that the rejection of refund claim on the ground of time bar is unjustified.
5.2 Second issue for rejection of refund claim is that the appellant has not fulfilled the conditions of receiving consideration in convertible foreign currency. The learned counsel explained that the group company in France had instructed their bank in France to make the payment to the appellant through HSBC Bank in India. Though the amount is paid in convertible foreign currency, it is remitted through Indian bank in Indian currency. The Tribunal in the case of M/s. Mitsubishi Heavy Industries India Pvt. Ltd., (supra) had occasion to consider the same issue and had observed as under:-
"10. It is relevant to note that when a service is provided to a person located abroad and the conditions is payment of consideration in convertible foreign exchange, the same shall stand satisfied, if the recipient of service transfers the money from his account which is in convertible foreign currency and remitted to Indian provider of service. The credit to account of Indian recipient of money at the bank of Indian recipient, will necessarily be in Indian rupees. It is apparent that no foreign exchange amount can be credited in bank located in India. The transactions are in Indian rupees. This aspect has been examined by the Tribunal in Balaji Telefilms Ltd. - 2016 (43) S.T.R. 98 (T-M). The Tribunal observed as below :-
That brings us to the second condition, viz., receipt of consideration in convertible foreign currency. The contract, undoubtedly, designates the consideration in Indian rupees. It is claimed by the respondent that this is normally resorted to so that the service provider is not put to loss on account of currency fluctuations and that, by such designation, the producer in India is assured of receiving the contracted amount; undeniably, a necessary factor in minimizing the risk 7 ST/40226/2019 of budgetary overrun. This justification is, unarguably, acceptable as logical.
The respondent did produce a certificate from Hong Kong and Shanghai Banking Corporation Ltd., their bankers, indicating that inward remittance from the overseas entity was in convertible foreign currency. The original authority rendered its findings after acknowledging this certificate. In the light of this, it is surprising that Revenue has chosen to argue that the condition of inward remittance in Export of Services Rules, 2005 had not been fulfilled.
Admittedly, the Indian Rupee is not a freely convertible currency 16. and benefit of export privileges were sought to be denied on the ground that contract was designated in Indian rupees. By that very argument, Indian rupee could not have been received as inward remittance through the banking channels because of that very non-convertibility. Consequently, there is no justification for entertaining any doubt that inward remittances were in convertible foreign currency.
11. In Sun Area Real Estate Pvt. Ltd. - 2015 (39) S.T.R. 897 (Tribunal-Mum.), it was held that the FIRC issued certifying that the payment not received in non-convertible rupees establishes payment in foreign exchange. Such payment in rupees is equal to foreign exchange. The Tribunal referred to Notification dated 3-5-2000 of the RBI and Regulation 3 of Foreign Exchange Regulations, 2000."
Thus, when the amount is adjusted in the bank account and remitted to the service provider in India through bank account in Indian currency, the same is to be considered as paid in convertible foreign currency. Following the said decision, I am of the view that the condition provided in Rule 6A is fulfilled and the services are exported. The second issue is held in favour of the appellant. 5.3 The third issue is with regard to unjust enrichment. It is settled law that taxes cannot be exported and, therefore, since the services are provided outside India the doctrine of Unjust Enrichment cannot be applied to services exported. In the present case, the services having been exported outside India, the discussions made by the authority below observing that the appellants have included the element of service tax in the debit note and, therefore, the refund is hit by doctrine of Unjust Enrichment, cannot sustain. Further, the learned counsel for the appellant has furnished various documents to 8 ST/40226/2019 show that the element of service tax was not collected from the service recipient but only the value of services were received, as seen from the bank statement issued from foreign bank. Therefore, the issue of unjust enrichment is also held in favour of the appellant.
6. From the discussions made above, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S) MEMBER (JUDICIAL ksr 16-08-2019