2026-VIL-1088-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Cost Sharing of Common Expenses between Parent Company and Wholly Owned Subsidiary - Applicability of Service Tax under Business Support Service - Demand notice alleging that the parent company has provided BSS to the subsidiary and is liable to pay service tax on the amount recovered from the subsidiary under the head "Business Support Service" as specified in Section 65 of the Finance Act, 1994 - Whether cost sharing of common expenses between a parent company and its wholly owned subsidiary amounts to provision of service taxable under the category of business support service – HELD - The parent company merely procures services from external vendors on behalf of both entities and does not itself provide any service to the subsidiary. The recovery of expenses represents mere reimbursement of actual costs incurred and not consideration for services rendered. Prior to the amendment dated 01.05.2011, the definition of BSS specifically enumerated activities such as evaluation of prospective customers, telemarketing, processing of purchase orders, managing distribution and logistics, customer relationship management, accounting and transaction processing, and operational assistance for marketing. The activities in the present case such as hospitality, insurance premium, rent, repair and maintenance, and telephone charges do not fall within any of these specified categories - The arrangement satisfies the criteria of a "pure agent" under the Valuation Rules as the parent company recovers only the exact amount paid to third-party vendors without any markup. Additionally, whatever service tax is paid by the appellant, the same is entitled as CENVAT Credit by their subsidiary companies. Therefore, it will be termed as “service has been provided to self” and it is a revenue neutral situation and no service tax is payable by the appellant - The demand of service tax is set aside and the appeal is allowed
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