SEZ input tax refund: revisional power failed where the statutory preconditions for disturbing the refund were not met.

Revision could be invoked only if the subordinate order was erroneous and prejudicial to revenue. The appellate authority had examined the SEZ unit's refund claim under Section 20(2) of the Karnataka Value Added Tax Act, Rule 130(A) of the Karnataka Value Added Tax Rules, and the definition of input in Section 2(19), and treated inputs used for setting up, operation, maintenance, and other covered business purposes as eligible for refund. The revisional authority adopted a narrower view limiting refund to inputs directly connected with manufacture and processing, which was not the statutory position. On that basis, the jurisdictional conditions for revision were absent and the refund on the disputed purchases was sustained.

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Issues: Whether the revisional authority could invoke revisional power to disallow refund of input tax claimed by an SEZ unit, and whether inputs purchased for operation, maintenance, and other business uses in the SEZ were eligible for refund under the statutory scheme.

Analysis: The statutory precondition for revision is that the subordinate order must be shown to be erroneous and prejudicial to the revenue. The appellate authority had examined the refund claim with reference to Section 20(2) of the Karnataka Value Added Tax Act, 2003, Rule 130(A) of the Karnataka Value Added Tax Rules, 2005, and the definition of input under Section 2(19) of the Act, and had held that an SEZ unit is entitled to refund on inputs used for setting up, operation, or maintenance, as well as for other business uses covered by the definition of input. The revisional authority proceeded on the narrower premise that refund was confined to inputs directly connected with manufacture and processing, which was not the statutory position. Since the subordinate order was supported by the applicable provisions and did not suffer from error or prejudice to revenue, the jurisdictional basis for revision was absent.

Conclusion: The revisional order was not sustainable and the assessee was entitled to refund of input tax on the disputed purchases.

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