Commission-based sales promotion was outside clearing and forwarding service before 1 July 2003, so no extra service tax applied.

Commission-based procurement of orders and sales promotion was held outside clearing and forwarding agent service for the period before 1 July 2003, because the assessee had separate agreements for clearing and forwarding work and for order procurement/sales promotion. The latter activity was treated as business auxiliary service only from 1 July 2003, so prior-period commission-based sales promotion and marketing was not covered by the service tax net. No further service tax was payable on the disputed activity for that period.

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Issues: Whether the activity of procuring orders and undertaking sales promotion and marketing on commission basis fell within clearing and forwarding agent service so as to attract service tax for the period prior to 1 July 2003.

Analysis: The respondent had entered into separate agreements, one relating to clearing and forwarding service on which service tax had already been paid and the other relating to procurement of orders and sales promotion on commission basis. The activity of sales promotion and marketing was brought within the scope of service tax only as business auxiliary service with effect from 1 July 2003. For the prior period, commission-based sales promotion and marketing was not covered by the service tax net, and the agreement showed that the work was confined to obtaining orders for supply on commission basis.

Conclusion: The disputed activity was not clearing and forwarding service for the relevant period and no further service tax was payable.

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