SEZ refund entitlement protected: service tax refund cannot be denied for authorised operations within the SEZ.

Refund of service tax to an SEZ unit for specified input services used in authorised operations was held allowable because Notifications Nos. 9/2009-ST and 15/2009-ST only regulate the refund mechanism and cannot curtail the statutory immunity under the SEZ Act. Earlier Tribunal decisions were followed to hold that the amended clause in Notification No. 15/2009-ST could not deny refund merely because the services were consumed wholly within the SEZ. The disallowance was therefore unsustainable, and the assessee was entitled to refund with consequential relief.

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Issues: Whether refund of service tax was allowable to an SEZ unit in respect of specified input services used for authorized operations, and whether Notification No. 15/2009-ST could deny the benefit in respect of services consumed wholly within the SEZ.

Analysis: The refund claim arose under the exemption/refund mechanism created by Notification No. 9/2009-ST, issued under Section 93(1) of the Finance Act, 1994, read with the immunity framework under Sections 7 and 26(e) of the Special Economic Zones Act, 2005. The issue was already covered by earlier Tribunal decisions, which held that Notifications Nos. 9/2009-ST and 15/2009-ST only regulated the manner of operationalising the exemption and did not curtail the statutory immunity available to SEZ units. On that construction, the amended clause in Notification No. 15/2009-ST could not be used to deny refund merely because the services were consumed wholly within the SEZ.

Conclusion: The refund was allowable in favour of the assessee, and the disallowance was unsustainable.

Final Conclusion: The appeal succeeded and the assessee was held entitled to refund of the disallowed service tax along with consequential relief.

Ratio Decidendi: Exemption and refund notifications governing SEZ units must be read harmoniously with the SEZ Act, and they cannot be construed to take away the statutory immunity or defeat refund entitlement for services used in authorized operations within the SEZ.

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