CENVAT credit is admissible on sales commission services involving sales promotion.

The appellant claimed CENVAT credit on commission paid to an overseas service provider for procuring export orders.

A show-cause notice dated 31 August 2016 sought reversal of the credit for 2012–13, on the ground that the service was merely that of a commission agent and did not promote the appellant’s business. The authorities confirmed the demand, and the appellant appealed to the Tribunal.

Whether CENVAT credit was available on commission paid to an overseas service provider for procuring export orders, where the service was alleged to be only that of a commission agent and not sales promotion.

The Tribunal applied the definition of “input service” in Section 2(l) of the CENVAT Credit Rules, 2004, including the explanation inserted on 3 February 2016, and relied on CBEC Circular No. 943/4/2011-CX dated 29 April 2011.

As explained in Principal Commissioner of Central Excise, Calcutta IV v. Himadri Specialty Chemicals Ltd., 2022 (66) GSTL 264 (Cal.), commission-agent services involving an element of sales promotion may qualify for CENVAT credit; the circular recognises credit where sales promotion is involved, including where remuneration is linked to actual sales.

The Tribunal found the issue covered by the Calcutta High Court’s decision in Himadri Specialty Chemicals.

The High Court had treated commission services involving sales promotion as eligible for credit and held that the explanation to Section 2(l) clarified the legislative intention. Relying on that decision, the Tribunal rejected the basis on which the demand had been confirmed and allowed the appeal.

The appellant was eligible for consequential relief, if any, in accordance with law.