Sales promotion commission qualifies as input service credit when the agency performs broader promotional activities beyond mere procurement.

Cenvat credit of service tax paid on sales commission was held admissible where the agency's functions extended beyond mere procurement and included sales promotion activities such as trial samples, advertising, travel, discounts, gifts and exhibitions. The Tribunal treated the arrangement as sales promotion rather than a bare commission contract, and held that audit objection alone, without contrary evidence, was insufficient to deny credit. On that basis, the demand, interest and penalty were held unsustainable.

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Issues: Whether Cenvat credit of service tax paid on sales commission paid to a sales promotion agency was admissible as input service credit, and whether the demand, interest and penalty were sustainable.

Analysis: The agreement showed that the agency was required to undertake activities beyond mere procurement of sales, including trial samples, advertising, travelling, additional discounts, gifts and exhibitions, while commission was linked to the selling price. On these terms, the service was held to fall within sales promotion rather than a bare commission arrangement. The Tribunal also noted that the departmental reliance on audit objection and the absence of contrary evidence was insufficient to deny credit, and the circular relied upon supported admissibility of such credit on commission-based sales promotion services.

Conclusion: The credit was held admissible and the demand, interest and penalty were unsustainable.

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