SEZ service tax refund: approved input services could not be denied refund on nexus objections or because tax-free procurement was possible.

For an SEZ unit, refund of service tax on input services was treated as admissible where the services had been approved through the authorised committee process under the relevant refund notification. The Tribunal held that the Revenue could not later deny refund by re-agitating objections that the services lacked nexus with the manufactured goods or were not used in authorised operations once they had been approved for the SEZ process. It also held that refund could not be refused merely because the services could have been obtained without payment of service tax, if the notification otherwise applied. The appeals succeeded with consequential relief.

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Issues: (i) whether refund of service tax paid on input services could be denied on the ground that some services were not used in authorised operations or lacked nexus with the manufactured goods; (ii) whether refund was barred merely because the services could have been obtained without payment of service tax.

Issue (i): Whether refund of service tax paid on input services could be denied on the ground that some services were not used in authorised operations or lacked nexus with the manufactured goods.

Analysis: The refund claims were filed by an SEZ unit under Notification No. 9/2009-ST dated 03/03/2009, as amended by Notification No. 15/2009-ST dated 20/05/2009. The Tribunal noted that the approval of the services formed part of a committee process in which the Revenue was also represented, and once the services were approved, the Revenue could not later deny refund by contending that the approved services had no nexus or were not used in authorised operations.

Conclusion: The denial of refund on this ground was not justified and the issue was decided in favour of the assessee.

Issue (ii): Whether refund was barred merely because the services could have been obtained without payment of service tax.

Analysis: The Tribunal held that the mere availability of the services without tax did not prevent the service recipient from obtaining the services on payment of tax and claiming refund where the refund notification otherwise applied.

Conclusion: Refund could not be denied on this ground and the issue was decided in favour of the assessee.

Final Conclusion: The refund claims were held to be admissible and the appeals succeeded with consequential relief.

Ratio Decidendi: Where input services are approved for SEZ authorised operations and the refund notification applies, refund of service tax cannot be denied merely by re-agitating nexus or authorised-operation objections, nor because the services could have been procured without tax.

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