Cost-Sharing Not Taxable: CESTAT Rules Panasonic Not Liable To Service Tax On Advertisement Reimbursements Under BAS [Read Order]

The Customs, Excise and Services Tax AppellateTribunal (CESTAT), Chennai Bench, commented on cost-sharing being non-taxable and held that Panasonic was not liable to service tax on advertisement reimbursements under Business Auxiliary Services (BAS).

The appellant, Panasonic Home Appliances India Co. Ltd., had entered into an agreement with M/s. Panasonic Electric Works Asia Pacific Pvt. Ltd. (PEWAP) for advertising and sales of traded goods of foreign collaborators. The appellant allegedly failed to discharge service tax and show cause notices (SCNs) were issued as the promotion of goods do not qualify as export of services.

The authorized representative from the department submitted that according to Section 67 of the Finance Act, 1994, “consideration” includes any amount payable for taxable services provided or to be provided. Further, since the services in question were performed and utilized in India, they do not satisfy the conditions for treatment as ‘export of service’.

The tribunal relied on a plethora of judgments before delivering their findings. CESTAT noted that the concept of self-service does not apply in the present case and the agreement does not require the appellant to provide any services to PEWAP in return for payment, thus receiving no consideration.

The two member bench held that in absence of both a taxable service and consideration, no tax liability arises. Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) confirmed the decision in Hindustan Construction Company Ltd. v. Commissioner of Central Goods and Service Tax (2025) and found that the issue does not involve the rendering of any service.

Accordingly, the appellant was held to be eligible for consequential relief and the appeal was disposed of.

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