Cenvat credit on outward freight for FOR sales remains admissible, and prior voluntary reversal does not bar refund on merits.

Outward freight incurred for FOR sales was treated as part of the assessable sale price on which excise duty had been paid, so Cenvat credit on outward transportation was admissible. A refund claim arising after voluntary reversal of the credit on audit objection could not be rejected merely because the reversal had been made earlier; it had to be tested on merits. The prior reversal did not by itself defeat entitlement where the underlying credit claim was otherwise sustainable. On that reasoning, the assessee was entitled to Cenvat credit on outward transportation and refund of the reversed amount, and the adverse order was set aside.

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Issues: Whether Cenvat credit was admissible on outward transportation in respect of FOR sales, and whether refund could be denied merely because the credit had earlier been reversed voluntarily on audit objection.

Analysis: The outward freight related to sales on FOR basis, where the freight formed part of the assessable price on which excise duty had been paid. In such circumstances, the appellant was entitled to Cenvat credit on outward transportation. The refund application, having been filed after the appellant realised that the amount was not payable, had to be examined on merits and could not be rejected only on the ground of prior voluntary reversal. Reliance on the Supreme Court decision was not accepted, as the Tribunal had already distinguished it while allowing similar credit claims in the light of the Board circular.

Conclusion: The appellant was entitled to Cenvat credit on outward transportation and to refund of the reversed amount.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where outward freight is incurred in relation to FOR sales and is included in the sale price on which duty is paid, Cenvat credit is admissible, and refund cannot be denied solely because the credit was earlier reversed voluntarily if the claim is otherwise sustainable on merits.

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