Cenvat Credit on Railway Freight Allowed Where Supplier Paid Freight and Tax as Pure Agent

Cenvat credit was held admissible on service tax paid for railway freight used to transport inputs, where the goods were received in the factory without dispute and the freight and tax were separately reflected in the supplier's invoice. The supplier had paid the freight and service tax on the buyer's behalf and was treated as a pure agent for transportation charges. On those facts, credit on the input service of railway freight was available to the buyer, and denial of the credit was unsustainable.

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Issues: Whether the appellant was entitled to Cenvat credit of service tax paid on railway freight for transport of inputs, and whether the credit was admissible on the invoices issued by the supplier who had paid the freight and service tax on the appellant's behalf.

Analysis: The inputs were supplied by the seller through railway wagons, freight and service tax were separately shown in the invoice, and the material was received in the appellant's factory without dispute. The freight and tax were paid by the supplier on behalf of the buyer, and the supplier was treated as acting as a pure agent in relation to the transportation charges. On these facts, the credit on the input service of railway freight was held to be available to the appellant.

Conclusion: The appellant was entitled to Cenvat credit on railway freight, and the denial of credit was unsustainable.

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