SEZ refund limitation cannot override statutory exemption for service tax wrongly paid on authorised operations

Refund of service tax paid on services wholly used for authorised operations in a Special Economic Zone cannot be denied on the basis of the shorter limitation in Notification No. 09/2009-S.T. The SEZ Act, 2005, read with the SEZ Rules, grants exemption for such authorised supplies, and its overriding effect under section 51 prevails over inconsistent notification-based restrictions. Where tax was paid on services consumed entirely within the SEZ, the payment is treated as tax not payable, so refund is governed by section 83 of the Finance Act, 1994 read with section 11B of the Central Excise Act, 1944. The claim was within that statutory period and the limitation-based rejection was unsustainable.

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Issues: Whether refund of service tax paid on services used wholly for authorised operations in a Special Economic Zone could be denied as time-barred under Notification No. 09/2009-S.T., or whether the claim was maintainable under the Special Economic Zones Act and the refund provisions of the Finance Act and the Central Excise Act.

Analysis: The services were undisputedly used within the SEZ for authorised operations. Section 26(1) of the Special Economic Zones Act, 2005 read with Rule 31 of the Special Economic Zones Rules, 2005 grants exemption for such supplies, and Section 51 gives the SEZ regime overriding effect over inconsistent provisions in other laws. The conditions and limitation in Notification No. 09/2009-S.T. could not therefore defeat the substantive SEZ exemption. In any event, where service tax was paid on services wholly consumed in the SEZ, the payment was treated as tax not payable, so the refund was governed by Section 83 of the Finance Act, 1994 read with Section 11B of the Central Excise Act, 1944, not by the shorter period in the notification. The refund claim was filed within the statutory period applicable under that route.

Conclusion: The refund could not be rejected as time-barred, and the denial of refund was unsustainable.

Final Conclusion: The appeal succeeded and the refund claim was restored by setting aside the limitation-based rejection.

Ratio Decidendi: For SEZ authorised operations, the SEZ Act has overriding effect over inconsistent notification-based restrictions, and a refund claim for service tax wrongly paid on wholly consumed services is to be tested under the general refund provisions rather than a shorter notification period.

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