SEZ service tax refund cannot be denied where eligible services are used for authorised operations and tax was paid.

Section 26(1)(e) of the Special Economic Zones Act, 2005 grants exemption from service tax on taxable services used for authorised operations, and Section 51 gives the SEZ Act overriding effect over inconsistent law. The Tribunal noted that Notification No. 9/2009-Service Tax provided refund-based exemption, while Notification No. 15/2009 only altered the mechanism and did not cut down the substantive statutory benefit. Refund could not be denied merely because the services were consumed wholly within the SEZ, and service tax paid on eligible services remained refundable.

---

---

Issues: Whether refund of service tax paid on taxable services used for authorised operations in a Special Economic Zone could be denied on the ground that the services were consumed wholly within the SEZ and the exemption notification was amended accordingly.

Analysis: The provisions of Section 26(1)(e) of the Special Economic Zones Act, 2005 confer exemption from service tax on taxable services provided to a Developer or Unit for authorised operations, and Section 51 gives the SEZ Act overriding effect over inconsistent laws. Notification No. 9/2009-Service Tax dated 3.3.2009 granted exemption by way of refund, and Notification No. 15/2009-Service Tax dated 20.5.2009 only modified the operational mechanism. The Tribunal reiterated that these notifications do not curtail the substantive exemption available under the SEZ Act, and that the refund mechanism cannot defeat the statutory entitlement where service tax has in fact been paid on eligible services used for authorised operations. The issue was treated as covered by earlier decisions in the appellant's own case and by the established principle that SEZ benefits must be construed harmoniously with the notifications.

Conclusion: The refund claim could not be rejected on the ground of wholly consumed services within the SEZ, and the assessee was entitled to the refund.

Final Conclusion: The impugned order was set aside and the refund appeals were allowed with consequential relief.

Ratio Decidendi: Substantive SEZ exemption under the governing statute prevails over procedural limitations in refund notifications, and refund of service tax cannot be denied where the tax was paid on services used for authorised operations in an SEZ.

---