SEZ refund entitlement prevails over procedural service tax notifications for services consumed wholly within the zone.

Notifications issued under Section 93(1) of the Finance Act, 1994 were treated as procedural measures for implementing the exemption and immunity available under Sections 7 and 26(e) of the SEZ Act, 2005. On that construction, the amended clause in Notification No. 15/2009-ST could not be read to deny refund of service tax on services consumed wholly within the SEZ. The substantive SEZ benefit prevailed over the refund procedure, so refund entitlement remained available to the unit and denial of refund was not sustainable.

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Issues: Whether a Special Economic Zone unit was entitled to refund of service tax paid on services consumed wholly within the SEZ under Notification No. 9/2009-ST, as amended by Notification No. 15/2009-ST.

Analysis: The Tribunal held that the notifications issued under Section 93(1) of the Finance Act, 1994 operate only as the manner of giving effect to the exemption or immunity available under Sections 7 and 26(e) of the Special Economic Zones Act, 2005. On a harmonious construction, the amended clause in Notification No. 15/2009-ST could not be read as taking away refund entitlement for services wholly consumed within the SEZ, since the notifications are procedural and facilitative in nature and do not override the substantive SEZ benefit.

Conclusion: The assessee was entitled to refund, and the denial of refund could not be sustained.

Ratio Decidendi: Procedural notifications governing refund of service tax for SEZ units cannot curtail the substantive immunity or exemption conferred by the SEZ Act, and refund remains available even for services consumed wholly within the SEZ.

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