SEZ service tax exemption applies only to services consumed within the zone, not fund-raising services used outside it.

Exemption for services used in an SEZ is confined to taxable services provided for authorised operations and consumed within the Special Economic Zone. Banking and financial services used to raise funds through an initial public offer for an SEZ unit were treated as services rendered to and consumed at the corporate office outside the SEZ, so they did not qualify merely because the funds related to an SEZ project. The discussion also notes that later 2009 notifications did not assist where the tax payment and refund claim arose earlier, outside their operative scope.

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Issues: Whether service tax paid on banking and financial services used for raising funds through an initial public offer for an SEZ unit was exempt under Section 26(1)(e) of the Special Economic Zones Act, 2005 and Notification No. 4/2004-Service Tax dated 31-3-2004, and whether refund of such tax was allowable.

Analysis: The exemption under Section 26(1)(e) of the Special Economic Zones Act, 2005 is limited to taxable services provided to a developer or unit for carrying on authorised operations in a Special Economic Zone. Notification No. 4/2004-Service Tax dated 31-3-2004 similarly exempts only those services consumed within the Special Economic Zone. The services in question were used for raising finance through an initial public offer and, on the invoices, were rendered to and consumed at the corporate office outside the Special Economic Zone. Raising finance outside the Special Economic Zone, even for an SEZ project, was not treated as consumption of services within the Special Economic Zone. The later notifications of 2009 did not assist the claim because the tax had been paid in 2006 and the refund claim was filed earlier, outside their operative scope.

Conclusion: The refund claim was not allowable and the appeal failed.

Final Conclusion: The appellant was held ineligible for exemption and refund of the service tax paid to the service provider, and the original rejection of the claim was sustained.

Ratio Decidendi: Exemption for services supplied to an SEZ unit applies only when the services are provided for authorised operations and are consumed within the Special Economic Zone; services used outside the zone for fund-raising do not qualify for refund merely because they relate to an SEZ project.

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