Service tax on inter-unit services requires ascertainable consideration; absent any charge, the levy cannot stand.

Service tax on inter-unit support services depends on whether the taxable service has an ascertainable value or consideration. Although a Special Economic Zone unit and a Domestic Tariff Area unit of the same company may be treated as separate identities for the SEZ regulatory regime, that segregation does not by itself defeat taxability under the Finance Act, 1994. On the facts, the inter-unit invoices were only for convenience and no actual charge was made or collected, so there was no basis to levy service tax on a deemed value. The levy was therefore unsustainable where consideration was absent.

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Issues: (i) Whether a Special Economic Zone unit and a Domestic Tariff Area unit of the same company are to be treated as separate persons for levy of service tax on inter-unit support services; (ii) whether service tax can be levied where no charge or consideration is shown for the services rendered.

Issue (i): Whether a Special Economic Zone unit and a Domestic Tariff Area unit of the same company are to be treated as separate persons for levy of service tax on inter-unit support services

Analysis: The charging provisions of the Finance Act, 1994 apply to taxable services rendered by one person to another, and business support services fall within the taxable net. The Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 create a special accounting and regulatory regime for units operating both in the Special Economic Zone and in the Domestic Tariff Area. Rule 19(7) recognises two distinct identities with separate books of account, though not a separate legal entity. That special segregation is for the SEZ regime and does not support the assessee's mutuality argument so as to deny taxability merely because both units belong to the same company.

Conclusion: The plea that the SEZ unit and the Domestic Tariff Area unit were incapable of being treated as separate for service tax purposes was rejected.

Issue (ii): Whether service tax can be levied where no charge or consideration is shown for the services rendered

Analysis: Service tax under section 66 is levied on the value of taxable services, and the statutory scheme links taxability to the existence of consideration. The definition of taxable service also reflects a nexus with cash, deferred payment, or other valuable consideration. On the facts found, the inter-unit invoices were only for convenience and there was no actual charge collected for the services. In the absence of any ascertainable value or consideration for the service, there was no basis to levy service tax on a deemed value.

Conclusion: Service tax was not leviable because no charge was made for the services provided by the SEZ unit to the Domestic Tariff Area unit.

Final Conclusion: The Revenue's challenge failed, and the Tribunal's relief to the assessee was sustained on the decisive ground that the services were not charged for, making the levy unsustainable on the facts found.

Ratio Decidendi: Service tax is chargeable only when a taxable service has an ascertainable value or consideration; absent such charge, no levy can be sustained, even if the service is otherwise within the taxable category.

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