Exemption and taxability of SEZ services can determine jurisdiction where the dispute relates directly to rate of duty.

Questions on the taxability of services used or wholly consumed in a Special Economic Zone, and on refund or exemption under the relevant notifications, were treated as matters having a direct bearing on the rate of duty. The dispute was not confined to a bare refund claim because it turned on whether the services were exempt or taxable and whether refund could be claimed under the notifications or under section 11B of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994. On that basis, the controversy fell within matters relating to rate of duty, and the preliminary objection to High Court jurisdiction was upheld; the appeals were not maintainable before the High Court.

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Issues: Whether the High Court had jurisdiction under section 35G of the Central Excise Act, 1944 to entertain the Revenue's appeals when the dispute involved the taxability of services used or wholly consumed in a Special Economic Zone and the availability of refund/exemption under the relevant notifications.

Analysis: The appeal questions were not confined to a bare refund issue. The real controversy was whether services used within the Special Economic Zone were exempt or taxable, and whether refund could be claimed in relation to such services under the notifications or under section 11B of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994. That controversy had a direct bearing on the rate of duty, because the expression "having a relation to the rate of duty of excise" in section 35G(1) covers questions directly and proximately connected with exemption and taxability. The interpretation was supported by the statutory explanation referred to in section 35E(5) and by the principle that disputes on exemption notifications fall within the excluded category of matters relating to rate of duty.

Conclusion: The preliminary objection was upheld. The appeals were held not maintainable before the High Court.

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