SEZ unit wins service tax refund as special legislation overrides Finance Act notification conditions

CESTAT New Delhi upheld refund claims by a SEZ unit for service tax paid on input services. The revenue department denied refunds citing non-compliance with conditions in notifications under Finance Act, 1994. The Tribunal held that SEZ Act provisions being special legislation override general Finance Act notifications. Since the unit held valid approval from Development Commissioner and services were used for SEZ operations, exemption under SEZ Act applied. Conditions imposed by Finance Act notifications were inconsistent with SEZ Act provisions and could not deny refunds. Revenue appeals dismissed.

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Issues:
Admissibility of refund claims by SEZ unit for service tax paid on input services under exemption notifications.

Analysis:
The appeals were filed by the revenue challenging an order allowing refund claims by a SEZ unit for service tax paid on input services. The respondent, a pharmaceutical manufacturer and exporter, availed various services for its SEZ operations and filed refund claims under specific notifications. The revenue argued non-compliance with notification conditions, citing Supreme Court decisions on strict interpretation of exemptions. The respondent contended that SEZ units are exempt from service tax under the SEZ Act, supported by various decisions. The Tribunal found the issue to be settled in favor of SEZ units, citing SEZ Act provisions overriding other laws, including the Finance Act. The Tribunal emphasized that SEZ units are exempt from central excise, customs, and service tax, rendering exemption notifications redundant. The Tribunal upheld the Commissioner's decision, noting the respondent's compliance with SEZ requirements and the irrelevance of Finance Act notifications to SEZ exemptions. The appeals were dismissed based on settled law and previous decisions, without merit for interference.

Conclusion:
The Tribunal ruled in favor of the respondent, dismissing the revenue's appeals challenging the refund claims by the SEZ unit for service tax paid on input services. The decision was based on the overriding effect of the SEZ Act provisions, exempting SEZ units from various taxes, making Finance Act notifications irrelevant. The Tribunal upheld the settled law and previous decisions supporting SEZ units' exemption from service tax, concluding no grounds for interference with the Commissioner's decision.

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