Cenvat credit on outward transportation allowed for FOR sales when freight forms part of assessable value and seller retains risk.

Cenvat credit on outward transportation was treated as admissible for FOR sales where transportation charges were included in the assessable value and ownership and risk remained with the seller until delivery, consistent with the applicable CBEC circular. Credit on freight from the factory to the depot was not finally decided; the question turned on whether the transportation element had already been built into the selling price and required factual verification by the adjudicating authority. The dispute was therefore partly resolved in favour of credit eligibility for FOR basis sales and partly remitted for examination of the depot-related freight claim.

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Issues: (i) Whether Cenvat credit on outward transportation from the factory to the depot is admissible where the selling price at the factory gate and the depot price are the same and no freight is recovered from customers; (ii) Whether Cenvat credit on outward transportation in respect of goods sold on FOR basis is admissible when transportation charges are included in the assessable value and ownership and risk remain with the appellant.

Issue (i): Whether Cenvat credit on outward transportation from the factory to the depot is admissible where the selling price at the factory gate and the depot price are the same and no freight is recovered from customers.

Analysis: Credit on freight from factory to depot depends on the factual position whether the transportation element has already been absorbed in the selling price and assessable value. If the depot sale price is the same as the factory price and no separate freight is charged from customers, the outward transportation may form part of the cost structure relevant to credit eligibility. That factual verification was required from the records.

Conclusion: The issue was remitted for verification by the adjudicating authority; no final finding was returned on this point.

Issue (ii): Whether Cenvat credit on outward transportation in respect of goods sold on FOR basis is admissible when transportation charges are included in the assessable value and ownership and risk remain with the appellant.

Analysis: For FOR sales, where transportation charges are included in the assessable value and delivery is made at the buyer's premises, the ownership and risk continue with the seller until delivery. On that factual premise, the conditions of CBEC Circular No. 97/8/2007 dated 23.08.2007 were treated as satisfied, making outward transportation credit admissible.

Conclusion: Cenvat credit on outward transportation for FOR basis sales was held to be admissible in favour of the appellant.

Final Conclusion: The appeal succeeded only to the extent of recognising eligibility for outward transportation credit on FOR sales, while the remaining dispute on depot-related freight credit was sent back for factual verification.

Ratio Decidendi: Cenvat credit on outward transportation is admissible where the transportation cost is included in the assessable value and the seller retains ownership and risk till delivery, but depot-related freight credit turns on whether the freight element has already been built into the sale price and therefore requires factual verification.

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