SEZ refund rules require service tax relief on lease premium for authorised operations, with full refund payable upfront.

Service tax paid on lease premium for an SEZ unit was treated as refundable because the services were used for authorised operations and the SEZ framework grants exemption with overriding effect, using refund as the prescribed mode of implementation. The tax could not be retained merely because the payment was described as lease premium, and the procedural requirements for claiming exemption were satisfied. The framework also did not permit an eligible refund to be split into quarterly instalments over the lease period. The single eligible refund was therefore payable in one go, and quarterly apportionment was rejected.

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Issues: (i) Whether service tax paid on lease premium for an SEZ unit is refundable in view of the exemption under the SEZ law; (ii) whether the eligible refund can be directed to be disbursed only on a quarterly basis instead of in one go.

Issue (i): Whether service tax paid on lease premium for an SEZ unit is refundable in view of the exemption under the SEZ law.

Analysis: The lease premium was paid for acquiring the premises required for the assessee's SEZ operations. The SEZ enactment grants exemption from service tax on taxable services received for authorised operations, and the rules provide the manner for claiming such exemption. The exemption under the SEZ framework operates with overriding effect, and the refund mechanism is only the prescribed mode for giving effect to that exemption. Once the services were used for authorised operations and the procedural requirements were satisfied, the service tax could not be retained merely because the payment was described as lease premium.

Conclusion: The refund on the service tax paid on lease premium was admissible in favour of the assessee.

Issue (ii): Whether the eligible refund can be directed to be disbursed only on a quarterly basis instead of in one go.

Analysis: No provision in the SEZ framework supported apportionment of a single eligible refund into quarterly instalments over the lease period. The refund claim had been made on the basis of the actual tax payment made upfront, and the prescribed exemption procedure did not authorise a different mode of disbursal. The direction to spread disbursement over quarterly payments was therefore unsustainable.

Conclusion: The assessee was entitled to receive the full eligible refund in one go, and the quarterly apportionment was rejected.

Final Conclusion: The assessee succeeded on the substantive entitlement to refund and on the mode of disbursal, while the Revenue's challenge failed.

Ratio Decidendi: Where the SEZ law grants exemption for services used in authorised operations, refund is only the procedural mode of implementation and a single eligible refund cannot be split into instalments unless the statute or rules expressly so provide.

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