The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has allowed the appeals filed by Panasonic holding that the company was entitled to service tax exemption equivalent to the Research & Development (R&D) Cess paid on import of technology.
The bench of P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) the exemption notification underwent amendment from 19.09.2011, introducing specific conditions requiring payment of R&D Cess prior to service payment. While acknowledging this legal position, the Bench examined the factual matrix and found that the appellant had, in fact, paid the applicable R&D Cess and maintained supporting documentation demonstrating compliance with the conditions.
The appeals arose from orders passed by the Commissioner (Appeals), CGST, Noida, which had upheld the adjudication orders denying exemption under Notification No. 17/2004-ST as amended, and confirming service tax demand along with interest.
The dispute pertained to whether the assessee had correctly availed exemption from service tax to the extent of R&D Cess paid under the provisions of the Research and Development Cess Act, 1986, in respect of payments made towards import of technology and technical know-how from its foreign associated enterprise.
The department’s case was that the assessee failed to satisfy the conditions prescribed under the amended notification, particularly the requirement that R&D Cess must be paid prior to or at the time of payment for the taxable service. It was also alleged that the assessee had not furnished sufficient documentary evidence establishing the timing of such payments, thereby wrongly availing exemption and attracting extended limitation.
The adjudicating authority had confirmed the demand of service tax, invoking the extended period under Section 73 of the Finance Act, 1994, along with interest under Section 75. While penalty under Section 78 was set aside due to absence of suppression, a penalty under Section 76 was imposed. These findings were upheld by the first appellate authority.
Before the Tribunal, the appellant contended that it had duly paid R&D Cess on royalty and technical know-how fees and availed corresponding exemption in compliance with the law. It was argued that the figures in ST-3 returns were provisional and subsequently reconciled with actual payments, and that all relevant records and documents had been furnished to the department. The appellant further submitted that there was no suppression of facts, as the department was fully aware of its operations and agreements with the foreign entity.
The Tribunal observed that the department had been regularly apprised of the appellant’s activities through statutory filings and prior proceedings, negating any allegation of suppression or intent to evade tax. Consequently, it held that invocation of the extended period of limitation was not sustainable.
The Tribunal accepted the appellant’s contention that there was no short payment of service tax, noting that the final figures reconciled with actual payments and, in some cases, reflected excess payment. It held that the benefit of exemption could not be denied when substantive conditions were met and proper records were maintained.
The Tribunal set aside the impugned orders and allowed both appeals with consequential relief, ruling in favour of the assessee.
Case Details
Case Title: M/s Panasonic AVC Networks India Co. Ltd. Versus Commissioner of Central Excise & CGST, Noida-I
Citation: JURISHOUR-1051-CES-2026(ALL)Â
Case No.: Service Tax Appeal No.70264 of 2021
Date: 30.04.2026
Counsel For Appellant: A. P. Mathur, Advocate
Counsel For Respondent: A. K. Choudhary, Authorized Representative
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