Cenvat credit for SEZ refund is taken only on actual availment and utilisation, not mere disclosure in returns.

An SEZ unit does not forfeit refund under the exemption notification merely because service tax paid on input services is reflected in its ST-3 returns or accounted for in its books. The decisive requirement is actual taking and utilisation of cenvat credit; mere disclosure or bookkeeping entries do not establish availment of credit. On the record, the tax was not shown to have been utilised, and the authorities did not dispute non-utilisation, so the refund condition was not breached and the refund claim remained admissible.

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Issues: Whether an SEZ unit that reflected service tax paid on input services in its ST-3 returns, but maintained that no cenvat credit was actually taken or utilized, violated the condition in the exemption notifications so as to forfeit refund of the service tax paid.

Analysis: The notification scheme permitted SEZ units to either avoid payment of service tax at source or, if tax was paid, claim refund for services used for authorized operations, subject to the condition that cenvat credit on such tax was not taken. Mere maintenance of an account showing service tax paid, and reflection of that amount in ST-3 returns to inform the department, did not by itself establish availment of credit. The decisive requirement was actual taking and utilization of credit. On the record, the accumulated tax was not shown to have been utilized, and the lower authorities did not dispute such non-utilization.

Conclusion: Mere bookkeeping entries and disclosure in returns did not amount to taking cenvat credit, and the refund condition was not breached.

Final Conclusion: The refund claim of the SEZ unit was held to be admissible and the denial orders were set aside.

Ratio Decidendi: For denying refund under an SEZ exemption notification, cenvat credit is treated as taken only when the credit is actually availed and utilized, not when the tax paid is merely recorded or disclosed in returns.

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