Yesterday in Supreme Court - CX Valuation - Discount - Classification - Heel Guard - medicament or skin care product

This is with reference to DDT dated 26.08.2015 communicating email of Advocate S. Viswanathan.

It appears that reference to Notification No. 6/2015-CE(NT) dated 01.03.2015 has been given by mistake in the following paragraph of the measures taken for ‘Ease of doing business’ (Service Tax):

“If the export proceeds are not received within the prescribed time period, the exporter has to reverse the Cenvat Credit. Re-credit of such reversed Cenvat credit has been allowed, if such export proceeds are received within one year from the specified period.”

Actually, the above measure was taken by inserting a Proviso to Rule 6(8) of CCR,2004 vide Notification No. 21/2014-CE(NT) dated 11.07.2014.

As per Rule 6A of Service Tax Rules, 1994, to treat any service as export of service, one of the conditions is that the payment for such service has to be received in convertible foreign exchange. If the exporter of service does not receive payment within the period specified RBI, the service cannot be treated as exported and it has to be treated as exempted service being no service tax is payable as the PoP of service is outside India. So, the provisions of Rule 6 of CCR, 2004 applies in such situation and the service provider has to reverse Cenvat credit, if taken. In several cases, it is possible that the exporter may receive payment in convertible foreign exchange after expiry of the period specified by RBI and he may claim re-credit of the amount reversed under Rule 6 of CCR, 2004. Prior to 11.07.2014, there was no explicit provision allowing such re-credit. So, the measure taken can be considered towards ‘Ease of doing business’.

These are personal views.

Shvetal Parikh 26/08/2015