SEZ refund exemption prevails over procedure when services are used for authorised operations and tax was collected from the recipient.

A Special Economic Zone co-developer is entitled to refund of service tax paid on services used for authorised operations, because the exemption under the Special Economic Zones Act, 2005 is substantive and has overriding effect. The refund notifications operate only as a procedural mechanism and cannot curtail the statutory benefit where the services were received for authorised SEZ operations. Procedural objections and technical defects in the refund claim do not defeat the exemption. The refund also cannot be denied merely because the department disputes the taxability of the service in the hands of the provider, especially where service tax was actually charged and collected from the recipient.

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Issues: Whether a Special Economic Zone co-developer was entitled to refund of service tax paid on services used for authorised operations, and whether such refund could be denied on procedural objections or on the ground that some services were treated as taxable by the department.

Analysis: The refund claim was examined in the light of the Special Economic Zones Act, 2005, particularly the exemption granted to developers and co-developers for services used in authorised operations and the overriding effect of that Act. The Tribunal applied its earlier view that the statutory exemption is substantive and that the notifications governing the refund procedure only operationalise that exemption. It further held that procedural requirements under the refund notifications cannot defeat the benefit created by the parent Act when the services were received for authorised operations in the SEZ. The Tribunal also noted that where service tax had in fact been charged and collected by the service provider, the recipient could not be denied refund merely because the department disputed the underlying taxability of the service in the hands of the provider.

Conclusion: The appellant was entitled to the refund claims, and the objections based on procedure and technicalities were rejected.

Ratio Decidendi: The exemption under the Special Economic Zones Act, 2005 is substantive and has overriding effect, so refund-related notifications cannot curtail the statutory benefit where services are used for authorised SEZ operations.

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