SEZ refund entitlement cannot be denied for late approval of input services used in authorised operations.

Refund of service tax paid under reverse charge on input services used for SEZ authorised operations could not be denied merely because approval of those services was obtained after the tax was discharged. The governing SEZ refund notification did not require prior inclusion of the services in the approved list before procurement, and the decisive factor was whether the services were received and consumed for authorised SEZ operations. In light of the SEZ regime's overriding objective of relieving authorised operations from tax burden, a procedural timing objection could not defeat substantive refund entitlement. The rejection of refund was therefore unsustainable.

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Issues: Whether refund of service tax paid under reverse charge on input services used for SEZ authorized operations can be denied merely because the services were approved by the competent authority after the tax was paid.

Analysis: The appellant was an SEZ unit and the refund claim was filed within limitation. The disputed services were subsequently included in the approved list, and the notification governing SEZ refunds did not require prior inclusion of the service in the approved list before procurement. The decisive consideration was whether the services were received and consumed for authorized operations in the SEZ. The Special Economic Zones regime is intended to free SEZ units from tax burden, and the substantive entitlement to refund cannot be defeated by a procedural timing objection when the services are later recognized as approved services. The statutory scheme and the notification were applied in a manner consistent with the overriding effect of the SEZ law.

Conclusion: Refund could not be denied on the sole ground that approval of the services in the authorized list was granted after the tax was discharged. The rejection of refund was unsustainable and the assessee succeeded.

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