SEZ service tax exemption overrides inconsistent refund notification limits, though refund claims still need factual verification.

The SEZ Act, 2005 and SEZ Rules, 2006 grant exemption from service tax on taxable services used for authorised operations in an SEZ, and their overriding effect means inconsistent refund notification conditions or limitation periods under the Finance Act, 1994 cannot defeat that statutory benefit. The text also notes that refund entitlement may still require factual verification of invoices, bank statements, and supporting records, so claims may be remanded for limited re-examination where genuineness has not been finally tested.

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Issues: (i) Whether the exemption from service tax for SEZ units and developers is governed by the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 so as to override the conditions and limitation prescribed in the refund notification issued under the Finance Act, 1994; (ii) Whether the refund claims, including claims relating to the same quarter and the evidentiary verification of invoices and supporting documents, required remand for fresh examination.

Issue (i): Whether the exemption from service tax for SEZ units and developers is governed by the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 so as to override the conditions and limitation prescribed in the refund notification issued under the Finance Act, 1994.

Analysis: Section 26 of the Special Economic Zones Act, 2005 grants exemption from service tax on taxable services used for authorised operations in a Special Economic Zone, and Section 51 gives the Act overriding effect over inconsistent laws. Rule 31 of the Special Economic Zones Rules, 2006 mirrors that exemption for services used for authorised operations. On that basis, the conditions and limitation contained in the refund notification issued under the Finance Act, 1994 cannot curtail the statutory exemption available under the SEZ regime. The principle that no tax can be levied or collected except by authority of law also supports this view.

Conclusion: The exemption available to the SEZ unit was not liable to be denied on the basis of the refund notification's restrictive conditions or limitation period; the appellant succeeded on the substantive exemption issue.

Issue (ii): Whether the refund claims, including claims relating to the same quarter and the evidentiary verification of invoices and supporting documents, required remand for fresh examination.

Analysis: Although the appellant was held entitled to exemption in principle, the factual genuineness of the refund claims, including verification of invoices, bank statements, and other supporting documents, had not been finally examined at the appellate stage. The matter therefore required limited reappraisal by the adjudicating authority, with the relevant documents to be produced and with compliance with natural justice.

Conclusion: The matter was required to be remanded for limited verification of the refund claims and supporting records.

Final Conclusion: The substantive denial of refund on the ground of the notification's limitation and conditions was unsustainable, but the refund entitlement had still to be verified factually by the adjudicating authority on remand.

Ratio Decidendi: Where the SEZ statute and rules confer exemption for authorised operations and provide overriding effect, exemption notifications under the Finance Act, 1994 cannot impose inconsistent conditions or limitation to defeat that statutory benefit.

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