Cenvat credit on inward freight service tax upheld where reimbursable freight included tax and input service coverage applied.

Cenvat credit on service tax paid for inward transportation of furnace oil was allowable where the tax formed part of the reimbursable freight charged to the appellant. The Board circular and Rule 3 of the Cenvat Credit Rules, 2004 recognised credit for tax paid on input services, and entitlement did not depend on whether the service tax was paid by the GTA, consignor, consignee, or another person. Inward transportation of inputs was covered as an input service, and the appellate authority erred by not addressing the circular or giving reasons for departing from it. Denial of Cenvat credit was therefore unsustainable.

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Issues: Whether the appellant was entitled to Cenvat credit of service tax initially paid by the consignor and recovered from the appellant in respect of inward transportation of furnace oil.

Analysis: The applicable Board circular clarified that, under Rule 3 of the Cenvat Credit Rules, 2004, credit of service tax paid on input services could be taken by a manufacturer or service provider, and the rule did not depend on whether the tax was paid by the GTA, consignor, consignee, or another person. The inward transportation of inputs was specifically covered as an input service, and the appellate authority had not dealt with the circular or given reasons for disregarding it. On the facts, the freight and service tax were reimbursable by the appellant and there was no case that the consignor had availed credit of the tax involved.

Conclusion: The appellant was entitled to the credit, and denial of Cenvat credit was unsustainable.

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