CENVAT credit on export freight before 01.04.2008 remained admissible under the then input service definition.

For the period before 01.04.2008, outward freight and airfreight used for export of finished goods fell within the then prevailing definition of input service, which covered outward transportation up to the place of removal, so CENVAT credit was admissible. The text also notes that an appellate order may be vulnerable where it is passed after inordinate unexplained delay and where it goes beyond the scope of the show-cause notice, including by introducing findings not covered by the original allegations.

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Issues: (i) Whether CENVAT credit on outward freight and airfreight used for export of finished goods was admissible for the relevant period prior to 01.04.2008; (ii) Whether the appellate order was unsustainable for having been passed after an inordinate delay and for travelling beyond the show-cause notice.

Issue (i): Whether CENVAT credit on outward freight and airfreight used for export of finished goods was admissible for the relevant period prior to 01.04.2008.

Analysis: The relevant definition of input service, as it stood before the amendment effective from 01.04.2008, covered outward transportation up to the place of removal. The credit related to outward freight used in connection with export clearances for the period 2005-06. The reasoning applied also distinguished the departmental objection to airfreight from the wider entitlement to outward transportation credit under the then prevailing definition.

Conclusion: The credit on outward transportation was admissible for the relevant period, and the assessee was entitled to the benefit.

Issue (ii): Whether the appellate order was unsustainable for having been passed after an inordinate delay and for travelling beyond the show-cause notice.

Analysis: The appeal remained pending for about 12 years before being decided, without any satisfactory explanation for the delay, and such belated adjudication was held to cause prejudice. The appellate authority also introduced a finding on the place of removal not being beyond the port/ICD/CFS, although the show-cause notice had proceeded only on the basis that outward freight was not covered by input service and had not bifurcated outward freight from airfreight. A decision going beyond the notice was treated as impermissible.

Conclusion: The impugned order was unsustainable because it suffered from inordinate delay and travelled beyond the show-cause notice.

Final Conclusion: The assessee succeeded, the adverse order was set aside, and the demand together with the related denial of credit did not survive.

Ratio Decidendi: For the period prior to 01.04.2008, outward transportation falling within the then definition of input service remained eligible for CENVAT credit, and an adjudicatory order is vulnerable if it is passed after inordinate unexplained delay or decides matters beyond the scope of the show-cause notice.

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