SEZ export services are governed by the special statute, and accumulated CENVAT credit refund remains admissible.

For a Special Economic Zone unit, the export character of authorised services is governed by the Special Economic Zone Act, 2005, not by the general Service Tax Rules, 1994. The Act's definitions and overriding effect displaced the rule under service tax law that was used to deny export treatment, so the services were treated as exported. On that basis, accumulated CENVAT credit attributable to authorised export operations was refundable under rule 5 of the CENVAT Credit Rules, 2004 and the related refund mechanism. The refund denial was therefore unsustainable and consequential relief followed.

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Issues: (i) Whether the export character of services rendered by a unit in a Special Economic Zone is to be tested under the Service Tax Rules, 1994 or in the light of the Special Economic Zone Act, 2005; (ii) Whether refund of accumulated CENVAT credit under rule 5 of the CENVAT Credit Rules, 2004 was admissible.

Issue (i): Whether the export character of services rendered by a unit in a Special Economic Zone is to be tested under the Service Tax Rules, 1994 or in the light of the Special Economic Zone Act, 2005.

Analysis: The applicable framework for a unit in a Special Economic Zone is the special statute governing SEZs. The definitions of "export" and "services" in the Special Economic Zone Act, 2005, together with the overriding effect of section 51, prevail over the general service tax regime. Accordingly, the criteria in rule 6(a) of the Service Tax Rules, 1994 cannot be applied to deny export status to authorised operations of an SEZ unit.

Conclusion: The services were to be treated as exported under the Special Economic Zone Act, 2005, and the denial based on the Service Tax Rules, 1994 was unsustainable.

Issue (ii): Whether refund of accumulated CENVAT credit under rule 5 of the CENVAT Credit Rules, 2004 was admissible.

Analysis: Service tax is a destination-based consumption tax, and where tax has been collected on input services used for authorised export operations, the accumulated credit cannot be retained against an exporter entitled to the statutory consequence of export. The special SEZ framework also recognises exemption for authorised operations, and the refund mechanism under rule 5 read with the relevant notification provides the necessary relief where credit has accumulated.

Conclusion: Refund of the accumulated CENVAT credit was admissible.

Final Conclusion: The appeal succeeded, the denial of refund was set aside, and consequential relief followed in favour of the assessee.

Ratio Decidendi: For an SEZ unit, the special statute governing authorised operations and exports overrides the general service tax rules, and accumulated CENVAT credit attributable to such exports is refundable under the credit-refund scheme.

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