SEZ service tax refund: exemption for authorised operations prevails, and procedural invoice defects cannot defeat substantive entitlement.

Service tax refund in a Special Economic Zone is admissible for services wholly consumed in the SEZ and used for authorised operations because the SEZ Act has overriding effect and exempts such taxable services; prior payment of tax does not defeat the refund claim. Refund cannot be denied merely because invoices were addressed to the corporate office, xerox copies were initially filed, or exchange rate fluctuation was cited where receipt and use of services are not disputed. Alleged defects such as missing signatures, wrong dates, lack of payment proof, and container repair charges required fresh verification on merits, and the last category depended on proof that the service formed part of authorised operations.

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Issues: (i) whether refund of service tax was admissible on services wholly consumed in the Special Economic Zone and for services used for authorized operations; (ii) whether refund could be denied merely because the invoices were addressed to the corporate office, or because xerox copies were filed initially, or because of alleged defects such as missing signature, wrong date, lack of payment proof, exchange rate fluctuation, and container repair charges.

Issue (i): whether refund of service tax was admissible on services wholly consumed in the Special Economic Zone and for services used for authorized operations

Analysis: The Special Economic Zone is a duty-free enclave and Section 51 of the Special Economic Zones Act, 2005 gives overriding effect to that Act. Section 26(1)(e) of the Special Economic Zones Act, 2005 grants exemption from service tax on taxable services provided to a developer or unit for carrying on authorized operations. Payment of tax on an exempt service does not convert the service into one on which refund can be denied merely because tax was initially paid.

Conclusion: Refund was admissible on this issue and the denial was not sustainable.

Issue (ii): whether refund could be denied merely because the invoices were addressed to the corporate office, or because xerox copies were filed initially, or because of alleged defects such as missing signature, wrong date, lack of payment proof, exchange rate fluctuation, and container repair charges

Analysis: Denial solely because invoices were addressed to the corporate office was held to be unjustified where receipt and use of services were not disputed. Filing xerox copies initially could not by itself defeat the claim if original invoices were produced later and could be verified. Alleged defects such as missing signature, wrong date and absence of payment proof required fresh examination on merits. The denial based on exchange rate fluctuation was not supported. For container repair charges, the assessee had to establish that the service formed part of authorized operations in the Special Economic Zone, and that issue required de novo verification.

Conclusion: The refund could not be denied on the corporate-office invoice objection, on the xerox-copy objection, or on exchange rate fluctuation; the issues relating to defective invoices, payment proof and container repair charges were remanded for fresh consideration.

Final Conclusion: The refund claim succeeded on the substantive and certain procedural objections, while the remaining disputed items were sent back for fresh adjudication on merits after giving the assessee an opportunity to produce evidence.

Ratio Decidendi: An assessee in a Special Economic Zone cannot be denied refund of service tax on authorized operations by treating payment of tax on an exempt service as fatal, and procedural defects in documents cannot override substantive entitlement where the underlying receipt and use of services require verification or fresh adjudication.

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