SEZ refund eligibility turns on reverse charge tax payment, not actual remittance to the foreign service provider.

An SEZ unit seeking refund under the relevant refund notification satisfies the payment condition when it has discharged service tax under reverse charge on imported input services and supported the claim with challans. The notification did not require actual remittance of the underlying service consideration to the foreign service provider as an additional prerequisite, unless expressly stated. The services were correctly taxed at the recipient's end under the point of taxation rule for services received from an associated enterprise. On that basis, refund denial solely for non-payment of the foreign service fee was unsustainable, and the refund claim was allowed with consequential relief.

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Issues: Whether a Special Economic Zone unit that discharged service tax under reverse charge on imported input services was entitled to refund under the SEZ refund notification even though the foreign service provider had not been paid for part of the booked services.

Analysis: The refund condition required the SEZ unit to have paid the amount indicated in the invoice or challan, including service tax payable under reverse charge, to the person liable to pay the tax or the tax itself, as applicable. The condition did not require actual remittance of the service consideration to the foreign service provider as a prerequisite for refund. Since the unit had discharged the service tax under reverse charge and produced the challans, the statutory condition was satisfied. The service was also correctly treated as taxable at the recipient's end under the point of taxation rule for services received from an associated enterprise.

Conclusion: The refund could not be denied on the ground of non-payment of the service consideration to the foreign service provider, and the disallowance of the refund was unsustainable.

Final Conclusion: The appeal succeeded and the assessee was held entitled to the disputed refund with consequential relief.

Ratio Decidendi: For an SEZ refund claim under the relevant notification, discharge of service tax under reverse charge by the SEZ unit satisfies the payment condition, and actual payment of the underlying service consideration to the foreign provider is not an additional mandatory requirement unless expressly stipulated.

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