Inter-division services within the same organisation were held not taxable where the arrangement was revenue neutral.

Inter-division maintenance and repair services within the same organisation were treated as not taxable as services provided to another person because the divisional units were not separate persons for service tax purposes. The cost was merely transferred through debit entries, and any service tax paid would have been available as credit to the recipient units, making the situation revenue neutral. On that basis, the inter-division services were held not exigible to service tax and the demand could not be sustained, with consequential relief following.

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Issues: Whether maintenance or repair services rendered by one division of an organisation to its sister divisions are taxable as services provided to another person, and whether the demand could be sustained in a revenue-neutral situation.

Analysis: The divisional units belonged to the same organisation and were not to be treated as separate persons for levy of service tax on inter-division services. The cost transferred through debit entries formed part of the cost of the recipient divisions, and any tax paid on such transactions would have been available as credit to the recipient units. The situation was therefore revenue neutral.

Conclusion: The inter-division services were not exigible to service tax and the demand could not be sustained.

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

Ratio Decidendi: Services rendered within the same organisation, where the tax incidence is revenue neutral and credit would be available to the recipient unit, do not constitute taxable services provided to another person for the purpose of service tax levy.

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