Outward freight credit is admissible when F.O.R. destination sale and freight form part of assessable value.

Service tax credit on outward freight is admissible where finished goods are sold on F.O.R. destination basis and the freight is included in the assessable value on which excise duty is paid. On those facts, the buyer's premises may constitute the place of removal, so credit on transportation up to that point is allowable. The contrary view, applicable when freight is excluded and duty is discharged on an ex-works price, does not apply. The denial of Cenvat credit was therefore unsustainable and was set aside with consequential relief.

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Issues: Whether service tax paid on outward freight for transportation of finished goods to the customer's premises was eligible for Cenvat credit where the sale was on F.O.R. destination basis and freight was included in the assessable value.

Analysis: The freight charges were shown to have been incurred by the assessee and included in the assessable value on which excise duty was discharged. On those facts, the sale was treated as taking place at the buyer's premises and the place of removal was not confined to the factory gate. In such a situation, credit on outward transportation is admissible up to the place of removal. The contrary view, applicable where freight is not included and duty is discharged on ex-works price, was held inapposite.

Conclusion: The service tax credit on outward freight was allowable, and the rejection of credit was unsustainable.

Final Conclusion: The assessee succeeded on the merits and the denial of credit was set aside, with consequential relief.

Ratio Decidendi: Where freight is included in the assessable value and the sale is on F.O.R. destination basis, the buyer's premises may constitute the place of removal, making outward transportation credit admissible up to that point.

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