SEZ input tax refund applies independently of general restrictions, with remand limited to nexus verification and quantification.

A Special Economic Zone unit was treated as operating under a self-contained regime with overriding effect, so the special refund provision applied independently of the general input tax restriction and the unit was entitled in principle to refund of tax paid on eligible inputs. The prescribed SEZ refund rule was construed broadly to cover the appellant's software development and software application management activities, and the statutory conditions were held satisfied. Refund was therefore allowable on principle, but the matter was remitted for purchase-wise verification of nexus with the authorised business activity and for quantification of the refundable amount.

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Issues: (i) Whether the appellant, being a Special Economic Zone unit, was outside the ambit of the input tax restriction provision and entitled to the benefit of refund under the special refund provision; (ii) Whether the appellant satisfied the conditions for refund under the prescribed rule governing SEZ units; (iii) Whether refund could be granted for inputs used in software development and software application management, and whether the matter required remand for verification of nexus and quantification.

Issue (i): Whether the appellant, being a Special Economic Zone unit, was outside the ambit of the input tax restriction provision and entitled to the benefit of refund under the special refund provision?

Analysis: The special economic zone framework was held to operate as a self-contained regime with overriding effect over inconsistent local tax provisions. The special refund provision was treated as independent of the general input tax restriction provision. The appellant's SEZ status was undisputed, and the statutory language of the refund provision was construed to confer refund of tax paid on inputs to SEZ units without importing the restriction applicable to ordinary dealers.

Conclusion: Yes. The appellant was held to fall outside the general input tax restriction and was held entitled to the benefit of the special refund provision.

Issue (ii): Whether the appellant satisfied the conditions for refund under the prescribed rule governing SEZ units?

Analysis: The rule was read to cover both units operating in the processing area and units using inputs for the listed business activities. The expressions in the rule were given a broad construction having regard to the nature of software development and software application management, and the rule was applied to the appellant's operational activity in the SEZ processing area. The appellant was found to satisfy the relevant conditions under the rule.

Conclusion: Yes. The appellant satisfied the conditions under the prescribed rule.

Issue (iii): Whether refund could be granted for inputs used in software development and software application management, and whether the matter required remand for verification of nexus and quantification?

Analysis: The appellant's business activity was treated as processing and operation within the SEZ framework, making the inputs eligible in principle for refund. However, the supporting statement of purchases was found insufficient because the purpose of each purchase had not been adequately shown. For that limited reason, the matter was remitted to the assessing authority for examination of each purchase, verification of nexus with the business activity, and quantification of the refundable amount.

Conclusion: Yes, in principle refund was allowable, but the matter had to be remitted for limited verification and quantification.

Final Conclusion: The decision affirms the SEZ unit's entitlement to refund of tax paid on eligible inputs, while leaving the precise refundable amount to be determined on remand after purchase-wise verification.

Ratio Decidendi: A special refund provision for SEZ units operates independently of the general input tax restriction regime, and refund of tax paid on inputs cannot be denied merely because the unit's output is service-oriented, provided the inputs are shown to have the requisite nexus with the authorised SEZ business activity.

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