FOR sale freight included in price: outward transportation qualified as input service for CENVAT credit.

Where goods are sold on a FOR basis and freight forms part of the sale price, outward transportation up to the customer's premises can qualify as input service for CENVAT credit purposes. The invoice and purchase order terms showed that freight was included in the price, there was no separate freight recovery, and the seller retained responsibility till delivery. Applying the conditions in the relevant Board circular for FOR sales, the outward freight was treated as admissible for credit. The denial of CENVAT credit was therefore unsustainable, and the credit was held admissible.

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Issues: Whether CENVAT credit of service tax paid on outward transportation freight was admissible where the goods were sold on free on road basis and freight formed part of the sale price.

Analysis: The invoice and purchase order terms showed that the sale was on FOR basis with freight included in the price, there was no separate freight recovery, and the transport arrangement indicated that the seller retained responsibility till delivery. The Board circular on FOR sales prescribed conditions for allowing credit on outward transportation, and those conditions were found to be satisfied. The settled view applied to the facts was that outward transportation to the customer's premises in such circumstances qualifies as input service.

Conclusion: Denial of CENVAT credit was held to be unsustainable and the credit was held admissible in favour of the assessee.

Ratio Decidendi: Where sale is on FOR basis and freight is an integral part of the assessable value, outward transportation up to the customer's premises can qualify as input service for CENVAT credit purposes.

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