The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the service tax demand for Maintenance and Repair Services on Nepal clients as there was non-fulfilment of condition of receiving proceeds in convertible foreign exchange.
The appellants, were engaged in providing “Maintenance and Repair Services” and “Installation and Commissioning services”. After investigation and verification, the Revenue found that the appellants were not discharging Service Tax for the services rendered to their Nepal clients. Invoking the extended period provisions, the Show Cause Notice was issued on 02.09.2009 for the period April 2004 to March 2009.
In the present case, the service provided by the appellant falling under Section 65 (105) (zzg), is specifically mentioned at Export of Services Rules, 2005, Rule 3 (1) (ii). Under this Rule, even if the service is partly provided abroad, the same is to be treated as export of service. In the present case, admittedly, the “repairs and maintenance service” has been carried out for their Nepal based clients at Nepal only. Therefore, this condition is getting fulfilled.
The appellant submitted that they have received the payment in Nepalese currency and the same has been converted into Indian Rupees and hence the same is to be treated receipt of convertible foreign currency. On going through the nine invoices enclosed in the Appeal book, we find that the amount is given as “Rs.”, without specifying as to whether it is for “Nepalese Rupees” or for “Indian Rupees”.
A Two-Member Bench comprising R. Muralidhar, Member ( Judicial ) and K. Anpazhakan, Member ( Technical ) observed that “We also find that the condition of receiving the proceeds in convertible foreign exchange is a mandatory condition and not a procedural one. During the period under discussion, the Tribunals and High Courts were consistently holding that while mandatory condition is required to be fulfilled without any deviation, the procedural lapses, if any, can be condoned.
“Therefore, in the present case, the appellant has not fulfilled the Condition of receiving the proceeds in “Convertible Foreign Exchange”, as has rightly been held by the Adjudicating Authority with proper reasoning at Page 6 of the Order in Original and as upheld by the Commissioner ( Appeals ). Therefore, we hold that the Appeal fails on merits. Accordingly, we uphold the impugned Order on merits” the Bench noted.
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