Retrospective clarification of sales promotion supports CENVAT credit for commission-agent services used to market dutiable goods.

CENVAT credit on service tax paid for commission-agent services used to market cement was treated as admissible because sales promotion falls within input services. The Explanation to Rule 2(l), which expressly includes sale of dutiable goods on commission basis within sales promotion, is described as clarificatory rather than creating a new benefit. It therefore applies retrospectively to pre-notification periods, supported by departmental guidance and judicial precedents. The notes state that denial of the credit, with consequential interest and penalty, lacked legal basis.

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Issues: (i) Whether CENVAT credit was admissible on service tax paid on commission paid to agents for marketing cement up to 02.02.2016; (ii) Whether the Explanation inserted in Rule 2(l) treating sale of dutiable goods on commission basis as sales promotion operated retrospectively.

Issue (i): Whether CENVAT credit was admissible on service tax paid on commission paid to agents for marketing cement up to 02.02.2016.

Analysis: Rule 2(l) covers sales promotion within input services. The Explanation inserted by Notification No. 2/2016-C.E. clarified that sales promotion includes services for sale of dutiable goods on commission basis. The departmental circular also recognised admissibility of credit on such services. The contrary precedent relied on for denial had been set aside and remanded by the Supreme Court and could not govern the matter.

Conclusion: CENVAT credit on service tax paid on sales commission was admissible to the assessee.

Issue (ii): Whether the Explanation inserted in Rule 2(l) treating sale of dutiable goods on commission basis as sales promotion operated retrospectively.

Analysis: The Explanation was clarificatory of the existing expression "sales promotion" and judicial precedents, including the jurisdictional High Court decision, recognised its retrospective application.

Conclusion: The Explanation operated retrospectively and covered sales on commission basis for the pre-notification period, in favour of the assessee.

Final Conclusion: The denial of credit, and the consequential interest and penalty, lacked legal basis.

Ratio Decidendi: A clarificatory explanation that expressly includes sale of dutiable goods on commission basis within sales promotion applies retrospectively for determining eligibility of CENVAT credit on commission-agent services.

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