Un-invoiced group allocations were not taxable service consideration where no actual service or recipient liability was proved.

Un-invoiced allocations by a foreign parent to its Indian subsidiary were not taxable because they were shown as internal stewardship or shareholder ? No, avoid non-English. They were treated as expenses retained in the parent's books, not as services consumed by the Indian company, and no contractual service-provider relationship was established. The subsidiary had already paid service tax on invoiced allocations under reverse charge, but the disputed amounts were neither recorded in its books nor supported by evidence of actual service. Mere book entries, cost allocations, reimbursements, or internal apportionments did not create taxable service or consideration, so the demand, interest and penalties were not sustainable.

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Issues: Whether service tax was leviable on un-invoiced allocations made by the foreign parent company to the Indian subsidiary, and whether the demand, interest and penalties could be sustained.

Analysis: The un-invoiced allocations were found to be expenses retained in the parent company's books for its own stewardship/shareholder activities and were not shown to represent any service consumed by the Indian respondent. The respondent had already discharged service tax on invoiced allocations under reverse charge mechanism, while the disputed amounts were neither recorded in its books nor supported by any contractual arrangement creating a service provider-recipient relationship. The Tribunal relied on the settled principle that mere book entries, cost allocation, reimbursement, or internal apportionment do not by themselves create taxable service or taxable consideration. It further held that, in the case of associated enterprises, the point of taxation and valuation provisions could not fasten liability where the disputed amounts were not reflected in the recipient's books and no actual service was established.

Conclusion: No service tax was payable on the un-invoiced allocations, and the demand along with the connected penalties was not sustainable.

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