SEZ co-developer refund eligibility turns on retrospective approval and absence of unjust enrichment, subject to balance sheet verification.

Services rendered to an SEZ co-developer were treated as eligible for service tax refund because the co-developer approval, though issued later, was made effective from the date of the underlying agreement; the tax paid on such services was therefore refundable. The refund was also held not to be barred by unjust enrichment, as the recipient certified that the tax had not been paid to the service provider and the books reflected the amount as receivable, though the adjudicating authority was directed to verify the balance sheet treatment before sanction. The refund claim was thus allowed subject to accounting verification.

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Issues: (i) Whether services rendered to the SEZ co-developer were eligible for refund of service tax on the footing that the co-developer approval subsequently issued took effect from the date of the agreement; and (ii) whether the refund was barred by unjust enrichment.

Issue (i): Whether services rendered to the SEZ co-developer were eligible for refund of service tax on the footing that the co-developer approval subsequently issued took effect from the date of the agreement.

Analysis: The approval of the co-developer was issued later, but the agreement dated earlier was made part of that approval. On that basis, the approval was treated as effective retrospectively from the date of the agreement. The services in question were rendered to the approved co-developer for use in the SEZ, and the tax paid on such services was therefore treated as refundable.

Conclusion: The refund claim was held to be admissible on merits and the issue was decided in favour of the assessee.

Issue (ii): Whether the refund was barred by unjust enrichment.

Analysis: The service recipient certified that the service tax charged in the bills had not been paid to the appellant. The books and ledger entries were also relied upon to show that the tax amount was not recovered and was reflected as receivable. The matter was, however, directed to be verified against the balance sheet before sanction of refund, to confirm whether the amount stood shown as receivable as an asset.

Conclusion: The refund was held not to be hit by unjust enrichment, subject to verification of the balance sheet position by the adjudicating authority.

Final Conclusion: The appeal succeeded and the refund claim was allowed, subject to verification of the accounting treatment of the amount in the balance sheet before actual sanction.

Ratio Decidendi: Where a co-developer approval is made effective from the date of the underlying agreement, services rendered to the approved SEZ co-developer are eligible for refund of service tax, and unjust enrichment is not attracted if the tax burden was not recovered from the recipient.

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