service tax liabilities when expenses recovered by sister concern against wages & salaries of staff

[P Ovhal]

Dear Experts,
Service Tax liable when one company had reimburse Staff salary & wages expenses from its sister concern. i.e. Employees/Staffs on the pay roll of one company also happens to look after the work of sister concern of that company which is separately registered with CE & ST Dept. Now both companies are merged.
Can this company need to pay Service Tax of Reimbursed Amount as provided Services to its sister concern.
Please suggest any Judgment /notification.

Rregards

PRO

AI Summary

Separate legal entity principle: intra group reimbursements are non taxable unless margins convert them into taxable services.
Whether reimbursements of staff salary and wage expenses between related entities attract service tax depends on whether the payer and payee are distinct legal entities or units of the same entity. Pure cost sharing or pass through reimbursements without markup are ordinarily non taxable, while any added margin may be taxable and must be assessed under valuation rules. The inquiry emphasizes corporate form and functional indicia (incorporation, PAN usage, management unity, tendering and agreements) over mere separate registrations.