SEZ refund exemption prevails over procedural lapses, and delayed refund interest runs after three months from application.

Under the SEZ Act, service tax refund for services used in authorised operations cannot be refused merely for later or imperfect compliance with Notification No. 17/2011-ST procedural requirements such as approval of the specified services list or filing Form A-1, because the statutory exemption under Section 26 prevails over inconsistent notification conditions by virtue of Section 51. The Tribunal also applied the refund-interest rule that, where a refund under Section 11B is not granted within three months of the application, interest under Section 11BB runs from the day after that period expires and is not deferred until the refund is finally allowed. The refund and consequential interest were therefore held payable.

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Issues: (i) Whether refund of service tax paid on services used for authorised operations in a Special Economic Zone could be denied for non-compliance with procedural conditions under Notification No. 17/2011-ST, including approval of the specified services list and filing of declaration in Form A-1; and (ii) whether interest was payable on delayed refund from the expiry of three months from the date of receipt of the refund application.

Issue (i): Whether refund of service tax paid on services used for authorised operations in a Special Economic Zone could be denied for non-compliance with procedural conditions under Notification No. 17/2011-ST, including approval of the specified services list and filing of declaration in Form A-1.

Analysis: The refund claim related to services admittedly received in the SEZ for authorised operations. The Tribunal applied the settled position that Section 26 of the Special Economic Zone Act, 2005 grants substantive exemption to services provided to a developer or unit for authorised operations, and that Section 51 of the same Act gives it overriding effect over inconsistent provisions in other laws. Once the SEZ operations are authorised, the exemption is not defeated merely because the approval of specified services or the declaration contemplated by the notification was obtained later or not furnished in the prescribed manner. Procedural conditions in the notification cannot override the statutory exemption under the SEZ Act.

Conclusion: The refund could not be denied on technical or procedural grounds, and the rejection was unsustainable.

Issue (ii): Whether interest was payable on delayed refund from the expiry of three months from the date of receipt of the refund application.

Analysis: The Tribunal applied the rule that where a refund due under Section 11B of the Central Excise Act, 1944 is not granted within three months of the application, interest becomes payable under Section 11BB of that Act from the day immediately after expiry of that period. The liability to pay interest is not postponed until the date of the appellate order allowing refund.

Conclusion: Interest on the delayed refund was payable from the expiry of three months after the refund application.

Final Conclusion: The appeal succeeded, the refund was directed to be granted, and the appellant was held entitled to consequential reliefs including interest on delayed payment.

Ratio Decidendi: Substantive exemption available under the SEZ Act for authorised operations cannot be defeated by procedural requirements in an exemption notification, and statutory interest on delayed refund runs from expiry of the prescribed refund-processing period.

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