Place of removal rules govern CENVAT credit on outward freight for FOR sales and sister-unit transfers.

For FOR destination sales, where ownership and transit risk remain with the seller until delivery, the buyer's premises are treated as the place of removal, so outward GTA credit up to that point is admissible. For clinker transferred to sister units without freight included in the assessable value, the factory gate remains the place of removal, and credit on transportation beyond the factory gate is not admissible. The order was modified accordingly, allowing credit only for FOR destination clearances and sustaining denial for inter-unit transfers, with consequential recomputation of interest and penalty.

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Issues: (i) whether CENVAT credit on service tax paid for outward transportation of goods sold on FOR destination basis was admissible by treating the buyer's premises as the place of removal; (ii) whether CENVAT credit on service tax paid for outward transportation of clinker transferred to sister units was admissible when the freight was not included in the assessable value.

Issue (i): Whether CENVAT credit on service tax paid for outward transportation of goods sold on FOR destination basis was admissible by treating the buyer's premises as the place of removal.

Analysis: For FOR destination sales, the determining factor is where ownership and risk in transit remain with the seller until delivery is accepted by the buyer. In such transactions, the buyer's premises constitute the place of removal for central excise purposes, and transportation up to that point is part of the taxable clearance.

Conclusion: The credit on outward GTA services for FOR destination sales is admissible and this issue is decided in favour of the assessee.

Issue (ii): Whether CENVAT credit on service tax paid for outward transportation of clinker transferred to sister units was admissible when the freight was not included in the assessable value.

Analysis: Where clinker was transferred without any sale and the freight element was not included in the assessable value, the factory gate remained the place of removal. The assessee could not adopt one place of removal for duty valuation and a different place for claiming input-service credit on the same movement. On the facts, transportation beyond the factory gate to sister units was not eligible for credit.

Conclusion: The credit on outward GTA services for transfer of clinker to sister units is inadmissible and this issue is decided against the assessee.

Final Conclusion: The impugned order was modified, credit was allowed only for FOR destination clearances, the denial of credit for transfers to sister units was sustained, and the matter was sent back for consequential recomputation of interest and penalty.

Ratio Decidendi: For FOR destination sales, the buyer's premises are the place of removal where the seller retains ownership and transit risk until delivery, but in stock transfers without inclusion of freight in assessable value, the factory gate remains the place of removal and outward transport beyond it is not eligible for CENVAT credit.

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