Page 124 - GSTL_2nd July 2020 _Vol 38_Part 1

42 GST LAW TIMES [ Vol. 38
The above mentioned decision has also been followed by this Tribunal in the
matter of Pam Pharma & Allied Machinery Co. Pvt. Ltd. v. CST, Mumbai - (2015) (7)
TMI 755 = 2015 (37) S.T.R. 958 (Tribunal) in which this Tribunal while holding
that the appellant has complied with conditions of Export of Services Rules, 2005,
granted refund to the appellant. He also relied upon the decision of Chennai
Bench of this Tribunal in the matter of Arafaath Travels Pvt. Ltd. v. CST, Chennai
reported in 2017 (7) G.S.T.L. 437 (Tri. - Chennai) in which it has been held that
procedure of retaining the service charge/commission amount and only remit-
ting the remaining portion of the proceeds will have to be necessarily treated as
saving of foreign exchange and by implication is akin to receipt of monies in
convertible foreign exchange. The service rendered by the appellant to the for-
eign recipient will be nothing but export of “Business Auxiliary Services” which
are exempted from liability to Service Tax.
5. The Learned Authorised Representative on behalf of the Revenue re-
iterates the finding in the impugned order and submitted that the appeal filed by
the appellant deserves to be dismissed.
6. According to me, since out of the total payment to be made by the
appellant in India to its Parent Company at Singapore, the same was reduced to
the extent of his service charges/commission and the remaining amount was
remitted to the foreign Parent Company in foreign exchange, and since such In-
dian Rupees was obtained in lieu of foreign exchange, therefore the same will be
deemed to be convertible exchange. The Hon’ble Supreme Court in the matter of
J.B. Boda & Co. Pvt. Ltd. v. CBDT reported in 2002-TIOL-2578-SC-IT while inter-
preting convertible foreign exchange under the provisions of Income-tax Act has
laid down that brokerage income retained by the assessee acting as agent of for-
eign reinsurer, out of the premium collected from the ceding insurance company
in India and remitting the balance to the foreign insurer in foreign exchange, can
be said to be the income in convertible foreign exchange and hence qualify for
deduction under Section 80-O of the Income-tax Act.
7. Rule 3(2) of Export of Services Rules, 2005 for the non-compliance of
which, the appellant’s claim has been rejected by the authorities below is stated
as under :-
“Rule 3(2) of “Export of Services” Rules, 2005
(2) the provision of any taxable service specified in sub-rule (1) shall be
treated as export of service when the following conditions are satisfied
namely :-
(a) (****)
(b) Payment for such service is received by the service provider in con-
vertible foreign exchange.”
8. Although Rule 3(2) requires the payments to be received by the ser-
vice provider i.e. the appellant herein, in convertible foreign exchange, but in
view of the decision mentioned above and in particular the decision of the
Hon’ble Supreme Court in the matter of J.B. Boda & Co. Pvt. Ltd. (supra) and the
decision of the Tribunal in the matter of National Engineering Industries Ltd. (su-
pra) and Arafaath Travels Pvt. Ltd. (supra), even the procedure of retaining the
service charge/commission amount and only remitting the remaining portion of
the proceeds in foreign exchange will have to be necessarily treated as saving of
foreign exchange and by implication is akin to receipt of monies in convertible
foreign exchange. It is nothing but saving of foreign exchange as the appellant
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