Panasonic Home Appliances India Co. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The appeal arose from an order confirming service tax demands on the appellant under the category of “Business Auxiliary Service” (BAS) for advertisement and sales promotion activities undertaken in India. The appellant, engaged in manufacturing and trading household appliances and related products, had entered into an agreement with its foreign group company for advertising and promoting certain products. Under this agreement, the appellant incurred promotional expenses in India, raised debit notes, and received reimbursement of an agreed portion in convertible foreign exchange. The department treated this activity as promotion or marketing of goods belonging to a client and issued show cause notices demanding service tax along with penalties. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld the same.
The appellant contended that the arrangement was a cost-sharing mechanism without any mark-up, and therefore did not constitute a service. It argued that there was no service provider–recipient relationship, and the reimbursed amounts were not consideration for any taxable service. It further submitted that advertising agencies had already discharged service tax on the services rendered, and taxing reimbursements would amount to double taxation. It also relied on statutory provisions and judicial precedents to assert that reimbursement of expenses without profit element is not includible in taxable value. Additionally, it argued that the activity qualified as export of service, as the benefit accrued to a foreign entity and payment was received in foreign exchange.
