Input service credit for overseas sales commission was allowed where agents also promoted sales and maintained a sales force.

Service tax paid on commission to overseas sales agents was treated as eligible input service credit because the agents were engaged not only in selling goods but also in actively promoting sales and maintaining a sales force. The activity was therefore characterised as sales promotion rather than a bare sales transaction. The contrary departmental reliance on a Gujarat High Court ruling was distinguished on facts, and the Board circular was read as supporting credit where commission is linked to actual sales and includes a promotional element. The later explanation to the input service definition was treated as clarificatory, so credit remained admissible even for the period before 03.02.2016.

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Issues: Whether service tax paid on commission paid to overseas sales agents for promoting and selling the appellant's products was eligible for CENVAT credit as input service.

Analysis: The agreement showed that the overseas distributor was required not merely to sell the goods but also to actively promote the sale of the appellant's products and maintain a sales force for that purpose. The activity therefore had the character of sales promotion and was not confined to a bare sales transaction. The departmental reliance on the Gujarat High Court decision was distinguished on facts. The Board circular also supported the view that remuneration paid to sales commission agents is linked with actual sale and contains an element of sales promotion. The later explanation to the definition of input service was treated as clarificatory, and the Tribunal followed its earlier view that commission paid for such activities was creditable even for the period prior to 03.02.2016.

Conclusion: The denial of CENVAT credit was unjustified and the credit on sales commission was held admissible.

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