Cenvat credit on outward transportation denied where freight is excluded from assessable value and circular conditions are unmet.

Cenvat credit on outward transportation services is not admissible where goods are sold on FOR basis but freight is shown separately and not included in the assessable value, because the governing circular conditions for treating such transport as eligible input service are not met. The article also notes that the extended period of limitation may be invoked where inadmissible credit is detected during audit, as such discovery supports a finding that the non-disclosure was sufficient for longer limitation. The stated result is that the credit claim and the limitation challenge both fail.

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Issues: (i) Whether Cenvat credit on outward transportation services was admissible where the goods were sold on FOR basis but freight was shown separately and not included in the assessable value; (ii) Whether the extended period of limitation was rightly invoked.

Issue (i): Whether Cenvat credit on outward transportation services was admissible where the goods were sold on FOR basis but freight was shown separately and not included in the assessable value.

Analysis: The credit claim was examined in the light of the condition in the departmental circular governing outward transportation. Since freight was not included in the assessable value and the stated circular condition was not satisfied, the basis for availment of credit was not established. Reliance was placed on the earlier High Court view that FOR sale by itself does not entitle an assessee to credit on outward transportation unless the relevant conditions are met.

Conclusion: The Cenvat credit on outward transportation services was held to be inadmissible.

Issue (ii): Whether the extended period of limitation was rightly invoked.

Analysis: The availment of inadmissible credit came to light during audit. On that basis, the non-disclosure was treated as sufficient for invoking the longer limitation period, and the absence of suppression was not accepted.

Conclusion: The extended period of limitation was held to be rightly invoked.

Final Conclusion: The appeals were found to lack merit and the denial of credit and the limitation objection were both decided against the appellant.

Ratio Decidendi: Cenvat credit on outward transportation is not admissible where the freight is not included in the assessable value and the governing circular conditions are not met, and the extended limitation period can be invoked when inadmissible credit is detected through audit.

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