Service Export Refund Claims Limitation Runs From Foreign Exchange Receipt, Not Quarter-End: CESTAT Hyderabad

The Hyderabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the one-year limitation for refund claims by exporters of services runs from the date of receipt of foreign exchange remittance, and not from the end of the relevant quarter.

A coram of Judicial Member Angad Prasad and Technical Member A.K. Jyotishi was interpreting the amended refund notification applicable to service exporters from March 2016, and held,

"We, therefore, find that a plain reading of notification clearly requires them to file refund claim within one year from the date of receipt of convertible foreign exchange.”

The ruling came in appeals filed by GE India Industrial Pvt. Ltd. against an order of the Commissioner (Appeals) that had rejected its entire refund claim of ₹78.80 lakh for the July to September 2016 period, including ₹40.94 lakh that had initially been sanctioned by the Refund Sanctioning Authority.

GE India had filed the refund claim on July 27, 2017. The department held that three claims were time-barred because the remittances had been received more than one year before the filing date.

The company argued that the limitation period should be computed from the last date of the relevant quarter rather than the actual date of receipt of remittance, relying on earlier judicial precedents including the Larger Bench decision in Span Infotech (India) Pvt. Ltd. and the Karnataka High Court's ruling in Suretex Prophylactics India Pvt. Ltd.

Rejecting this contention, the tribunal held that the amended notification applicable after March 1, 2016 specifically prescribed a separate limitation period for service providers, making the earlier precedents inapplicable.

“We do not find any merit in the submission made by the appellant that it should be last date of the quarter in view of very specific provision of limitation made for service provider, as distinct from manufacturer in terms of Notification No. 14/2016,” the bench said.

On the second issue, the tribunal held that refund claims cannot be rejected merely because the claimant furnished Foreign Inward Remittance Certificates (FIRCs) instead of Bank Realisation Certificates (BRCs).

“Essentially foreign exchange has to be received in respect of exports made by the appellant for him to become eligible for refund. The documents required evidencing the receipt of the payment can be either FIRC or BRC, however, what is crucial is that the said document should categorically indicate that foreign exchange has been received in respect of said invoices under the cover of which export of service has taken place," the bench held

The tribunal noted that receipt of foreign exchange was not in dispute, but the department had raised concerns over whether the remittance documents could be properly correlated with the invoices relating to the export of services.

Holding that this factual verification still needed examination, the tribunal remanded the matter

For Appellant: Advocate Ashwani Pahwa

For Respondent: Ch. Venkat Reddy and M. Anukathir Surya, ARs