Mr. Bimal Jhunjhunwala Proprietor Of M/S Indotech Enterprises vs. The Assistant Commissioner CGST And Cx,Bbd Bag I Devision Kolkata North Commissionerate, And Ors

Held

The Court held that the manner in which the first respondent dealt with the decisions relied upon by the appellant was incorrect, as they failed to analyze their applicability. The Court noted that while the statutes might have changed, the authorities should have considered the ratio decidendi of previous decisions, especially those rendered during the service tax regime, which had pari materia provisions. The Court found that the issues raised by the appellant regarding the deemed receipt of foreign currency and the applicability of FEMA regulations and case law were not thoroughly adjudicated by the Adjudicating Authority or the Appellate Authority. Therefore, the Court decided to remand the matter back to the first respondent for a holistic consideration of all issues, including the appellant's contentions and the relied-upon judgments. The first respondent was directed to afford a personal hearing to the appellant and pass a fresh order on merits within three months of the hearing. The Court explicitly stated it had not gone into the merits of the case.

Facts

The appellant, Mr. Bimal Jhunjhunwala, challenged the rejection of his refund application by the Assistant Commissioner, CGST & CX (first respondent) via an order dated August 19, 2022. The rejection was based on the finding that the remittance received by the appellant was not in foreign convertible exchange, thus violating the definition of 'Export of Services' under Section 2(6) of the IGST Act, 2017. The appellant's appeal to the Appellate Authority (second respondent) was dismissed on March 31, 2023, affirming the first respondent's order. The appellant then filed a writ petition, which was dismissed by the Single Bench, leading to this intra-Court appeal. The appellant's refund application was based on remittances received through an agency outside India (WISE US Inc.) which converted US Dollars to Indian Rupees via a Vostro account with HDFC Bank.

Key Issues

1. Whether the remittance received by an Indian resident in Indian Rupees, through an exchange house located outside India that has remitted the funds via its Vostro account with an authorized dealer in India, shall be deemed to be received in foreign convertible exchange for the purpose of 'Export of Services' under Section 2(6) of the IGST Act, 2017? Petitioner's Contention: The appellant argued that if an Indian resident receives INR through an exchange house outside India, which converts foreign currency to INR via an authorized dealer's Vostro account, it should be considered as receipt in foreign currency. They relied on Regulation 4(2) of the Foreign Exchange Regulation 2015 and Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulation 2016, which deem such payments as receipt of foreign exchange. The appellant also cited decisions like WM Global Sourcing India Private Ltd. vs. Commissioner of Central Tax, Bengaluru East and J. B. Boda & Co. vs. Central Board of Direct Taxes, arguing that payment routed through a third party outside the country should not deny export benefits. They further contended that decisions from the erstwhile service tax regime, particularly concerning the Export of Service Rules 2005, were applicable and not properly considered. Revenue's Contention: The revenue authorities (first and second respondents) held that the remittance was not received in foreign convertible exchange as required by Section 2(6)(iv) of the IGST Act, 2017. They dismissed the appellant's reliance on previous decisions by stating they related to the erstwhile service tax regime and that the definition of 'Export of Service' in the IGST Act had not been amended.