FOR sales and freight-in-value support Cenvat credit on outward GTA service under reverse charge basis

Where excisable goods are sold on FOR basis and freight remains part of the assessable value until delivery, outward transportation is treated as an input service and Cenvat credit of service tax paid under reverse charge is allowable. The Tribunal followed settled precedent that delivery at the buyer's premises, with freight included in the duty-paying value and transit risk retained by the seller, brings outward GTA within input service. Beneficial circulars applicable during the relevant period supported this view, and the contrary disallowance could not stand.

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Issues: Whether Cenvat credit of service tax paid on outward transportation under reverse charge mechanism is admissible where excisable goods are sold on FOR basis and freight forms part of the assessable value.

Analysis: The sale was on FOR basis, the freight and transit risk remained with the seller till delivery at the customer's doorstep, and the transportation charges were integral to the transaction. The Tribunal followed the settled position that where delivery is at the buyer's premises and the freight is part of the value on which excise duty is paid, outward transportation qualifies as input service for Cenvat credit purposes. The earlier Tribunal view had been upheld by the High Court, and the issue was treated as no longer res integra. On this footing, the beneficial circulars applicable during the relevant period supported the assessee, and the contrary view could not be sustained.

Conclusion: Cenvat credit on outward GTA service was admissible, and the disallowance was unsustainable.

Final Conclusion: The assessee succeeded on the substantive tax issue and the demand did not survive.

Ratio Decidendi: Where excisable goods are sold on FOR basis and the freight till delivery is part of the assessable value, outward transportation is an input service and Cenvat credit of the service tax paid on such freight is allowable.

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