Rebate Eligibility on Exported Services Depends on Date of Service Provision, Not Payment Receipt: CESTAT [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that rebate eligibility on exported services depends on the date of service provision, not on the date of payment receipt in foreign exchange.

3i India Pvt. Ltd., the appellant, provided investment advisory services to a client in the United Kingdom between April and June 2012 and raised an invoice on June 29, 2012. The payment, however, was received later on December 20, 2012, in convertible foreign exchange.

The appellant filed a rebate claim under Notification No. 11/2005-ST, which permitted a rebate of service tax paid on exported services. The original authority allowed the rebate of Rs. 92,11,981, but the revenue challenged this decision.

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The Commissioner (Appeals) set aside the rebate, holding that the payment date was decisive and that by the time payment was received, the rebate notification had already been rescinded on July 1, 2012.

The appellant challenged this decision before the CESTAT, arguing that under Rule 3 of the Export of Services Rules, 2005, the export of services is deemed complete when the service is provided to a client outside India, and receipt of payment in foreign exchange does not determine the date of service provision for rebate eligibility.

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The appellant submitted that the services were fully rendered and invoiced before the rescission of the notification, making their claim valid under the then-existing rebate scheme. The revenue submitted that under Rule 3(2), a payment receipt is essential to treat services as exported and justify the denial of the rebate.

The two-member bench, comprising Anil G. Shakkarwar (Technical Member) and Dr. Suvendu Kumar Pati (Judicial Member), found that payment receipt is a condition for export, but the date of service provision determines eligibility under the rebate notification.

The tribunal held that since the services were rendered and invoiced before the rescission of the notification, rebate eligibility remained intact. The tribunal set aside the Commissioner (Appeals)’ order and restored the original rebate sanction. The appeal was allowed.

To Read the full text of the Order CLICK HERE

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