What is relevant date for claiming refund for export of service?
A 100% exporter of service is generally unable to utilise the CENVAT Credit balance of inputs, input service and capital goods lying in his books and accordingly claims refund as per Rule 5 of CENVAT Credit Rules, 2004 read with Notification no 27/2012-CE (N.T.) dated 18 June 2012.
As per the notification, refund application should be filed by the claimant before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (CEA) i.e. one year from the relevant date. It is pertinent to note that relevant date defined under explanation 1 to Sec 11B of the CEA covers only export of goods and is silent on export of service thereby creating an ambiguity in the minds of the exporter as well as department as to what would be relevant date for export of service.
Different authorities have interpreted relevant date for export of service in a different manner; a few of them are as follows:
In the following cases, it was held that export is complete only when foreign exchange is received in India accordingly relevant date of export of services should be date of receipt of foreign exchange:
- Alar Infrastructures Private Limited ( 2015 (38) STR 1087 Tri. – Delhi)
- M/s Bechtel India Pvt. Ltd. Versus CCE (2014 (34) STR 437 – Tribunal Delhi)
- Commissioner of Service Tax, Goa Vs. Ratio Pharma India Pvt. Ltd (2015 (39) STR 31 – Tribunal Mumbai - Larger Bench)
Contrary in the case of M/s. Affinity Express India Pvt Ltd Versus Commissioner Of Central Excise, Pune I 2015 (37) S.T.R. 321 (Tri. – Mumbai) it was held that payment condition is only to ensure that service provider receives payment in convertible foreign exchange so as to get benefit of service tax; and the date of receipt is not relevant to determine the timing of export; accordingly a service would be considered as export on issuance of invoice. (It is to be noted that many of the refund claims in Mumbai have been rejected on the ground that refund claim is filed after one year from the date of invoice, basis above judgement)
With both favourable and unfavourable decision being given on this topic, there always remained a question in the minds of exporter of service that what should be the relevant date for filing of refund claim for export of service.
Union Budget 2016 has put this much debated matter on rest and has amended notification for determining the relevant date for export of service [amended vide Notification no 14/2016 –CE (NT)]. As per the amended definition relevant date of export would be one year from the date of -
a. receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or
b. issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.
From the above it is evidently clear that refund for export of service can be claimed only after both the condition i.e. service is provided and consideration is received against the same. This is a welcome change by the exporters as it has given clarity to a long awaited topic and has also reduced the probability of litigation on the said topic. However the said amendment is a prospective one and destiny of litigations on relevant date for export of service prior to the amendment is yet to be decided.
(The above expressed views are author's own views)
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