Internal Services Not Taxable: Tribunal Rejects Service Tax Demand

The Tribunal held that the appellants did not provide services to any external party but only to themselves, thus rejecting the demand for service tax under "Business Auxiliary Service" (BAS) for the period August 2003 to September 2006. The Tribunal emphasized that services rendered by a company to itself are not subject to service tax, referencing previous decisions. Penalties imposed on the appellants were also set aside, emphasizing the need to identify the recipient of services to determine the applicability of service tax.

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Issues:
1. Demand of service tax under "Business Auxiliary Service" (BAS) for the period August 2003 to September 2006.
2. Penalties imposed on the appellants.

Analysis:
1. The appeal pertains to a demand of service tax under the head "Business Auxiliary Service" (BAS) for the period August 2003 to September 2006, along with challenges to penalties imposed on the appellants. The appellants collected an amount from their own refinery towards the cost of additives used in "extra-mile diesel." The appellants argued that they did not render any service to anyone but themselves during this activity. They contended that the demand of service tax on the amount collected from their own refinery was not sustainable. The appellants highlighted a similar demand that was vacated by the Commissioner of Central Excise, Tirunelveli, for a subsequent period. The appellants also relied on a Tribunal decision in their favor, emphasizing that no service tax was payable for services rendered by one unit of a company to another.

2. The Tribunal examined the contentions and held that the appellants did not render any service to any other party besides themselves. The Revenue did not identify any service recipient in the impugned order. The Tribunal referenced a previous decision where it was established that services rendered by a company to itself are not subject to service tax. Consequently, the Tribunal set aside the impugned order and allowed the appeal. The decision was dictated and pronounced in open court.

This judgment clarifies that services rendered by a company to itself are not liable for service tax, as established in previous Tribunal decisions. The case highlights the importance of identifying the recipient of services and the nature of the service provided when determining the applicability of service tax.

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