Outward freight credit depends on proving FOR destination sale and delivery up to the place of removal.

Outward freight credit on finished goods was treated as admissible only where the assessee proves a genuine FOR destination sale, with ownership and risk remaining with the seller until delivery and freight forming part of the sale price. In the absence of supporting agreement, invoices, or other evidence establishing those conditions, transportation beyond the place of removal cannot qualify as input service credit under the Cenvat Credit Rules. On the facts recorded, the denial of credit was sustained, and the connected penalty and interest were also maintained because the factual basis for FOR destination sale was not established.

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Issues: (i) Whether credit of service tax paid on outward transportation of finished goods up to the buyer's premises was admissible as input service credit under Rule 2(1) of the Cenvat Credit Rules, 2004 in the absence of proof of FOR destination sale and satisfaction of the stated conditions. (ii) Whether penalty and interest were sustainable on the facts of the case.

Issue (i): Whether credit of service tax paid on outward transportation of finished goods up to the buyer's premises was admissible as input service credit under Rule 2(1) of the Cenvat Credit Rules, 2004 in the absence of proof of FOR destination sale and satisfaction of the stated conditions.

Analysis: The credit on outward freight was held admissible only where transportation formed part of a genuine FOR destination sale and the seller retained ownership and risk till delivery, with freight forming an integral part of the price. The appellant failed to produce evidence such as the relevant agreement, invoices, or other material to establish FOR destination sale or fulfilment of the conditions reflected in the Board's circular. On the facts proved, outward transportation beyond the place of removal could not be treated as input service credit.

Conclusion: The credit was not admissible and the demand on this count was upheld against the assessee.

Issue (ii): Whether penalty and interest were sustainable on the facts of the case.

Analysis: Although the appellant relied on conflicting judicial views on outward freight credit, the denial of credit was upheld on the factual finding that FOR destination sale was not established. In that situation, the Tribunal held that penal consequences followed and the plea against penalty could not be accepted.

Conclusion: Penalty and interest were sustained against the assessee.

Final Conclusion: The appeal failed in entirety, with the disallowance of outward freight credit and the consequential penal and interest liabilities remaining undisturbed.

Ratio Decidendi: Credit on outward transportation is admissible only when the assessee proves a true FOR destination sale and the transportation is shown to be upto the place of removal; absent such proof, the credit and consequential penalty can be sustained.

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