SEZ service tax refund cannot be denied on suspicion alone where utilisation and approval support the claim.

Refund of service tax for services used in an SEZ cannot be denied on mere suspicion or on unverified objections about nexus and invoices in the head office name. Where the Development Commissioner had approved the relevant services and the Revenue produced no cogent evidence to disprove utilisation in the SEZ, the Tribunal held that the adjudicating authority had failed to conduct the necessary enquiry and had relied on conjecture instead of proof. The burden to justify denial of the refund remained on the Revenue, which it did not discharge; the refund was therefore admissible.

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Issues: Whether refund of service tax paid on services used in the Special Economic Zone was admissible under Notification No. 17/2011-ST dated 01.03.2011 when the Revenue denied the claim for want of nexus, alleged non-utilisation, and relied on the invoices being in the name of the head office.

Analysis: The refund claim related to services stated to have been consumed for SEZ operations. The Revenue rejected the claim mainly on suspicion and on the ground that no sufficient evidence was produced to establish utilisation in the SEZ. The record showed that the Development Commissioner had approved the relevant services and that the later approval was not disputed by the Revenue. The Tribunal held that the adjudicating authority had not conducted the necessary enquiry, had not brought cogent evidence to disprove utilisation, and had proceeded on conjecture. It was held that mere suspicion, however strong, cannot replace proof, and that the Revenue had failed to discharge the burden necessary to deny the refund.

Conclusion: The refund was admissible and the denial was unsustainable; the assessee succeeded.

Ratio Decidendi: A refund under the SEZ exemption notification cannot be denied on mere suspicion or by asserting absence of nexus without cogent evidence disproving utilisation, and the Revenue must discharge the burden of proof before rejecting the claim.

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