if you know relative filename of intermediate file, try 

 tar -xf $1 -O path/to/file.tar.gz | tar xf - 

where 

> -O, --to-stdout
> Extract files to standard output.

 1. you might need `-z` flag in second tar 
 2. please note that `-` is synonym for stdin, maybe that what you meant (`tar -xf $1 | tar -xf xargs` (*) ) ?

 tar -xf $1 | tar -xf - 



(*) xargs is backquoted