Destination-sale freight credit and limitation: outward freight tax credit was allowed, and extended limitation failed for want of suppression.

Cenvat credit on service tax paid on outward freight was admissible where the sale was on a destination basis and the purchase orders showed freight and insurance were borne by the manufacturer for delivery at the buyer's premises, making that premises the place of removal. The credit was therefore allowable both up to 31.03.2008 and for the later period, and the demand on merits failed. The extended limitation period was also unavailable because the assessee was registered, the credit was disclosed in returns, and the freight data was available in the accounts, negativing suppression and departmental ignorance. The demand was set aside on merits and limitation.

---

---

Issues: (i) Whether Cenvat credit of Service Tax paid on outward freight was admissible for the period up to 31.03.2008 and for the period from 01.04.2008 to 31.12.2009; (ii) Whether the demand for the extended period was barred by limitation on the ground that suppression was not established.

Issue (i): Whether Cenvat credit of Service Tax paid on outward freight was admissible for the period up to 31.03.2008 and for the period from 01.04.2008 to 31.12.2009.

Analysis: Under Rule 2(l) of the Cenvat Credit Rules, 2004, the pre-01.04.2008 position allowed credit on input services used in relation to clearance of final products from the place of removal. On the facts, the goods were supplied on a destination basis, and the purchase orders showed that freight and insurance were borne by the appellant for delivery at the buyer's premises. The place of removal was therefore the buyer's premises, and the service tax paid on freight related to clearance of goods up to that place. The reasoning applied to the cited coordinate-bench view on similar facts supported the same conclusion.

Conclusion: Cenvat credit on outward freight was admissible for both periods, and the demand on merits was not sustainable.

Issue (ii): Whether the demand for the extended period was barred by limitation on the ground that suppression was not established.

Analysis: The appellant was registered under the central excise and service tax laws, the credit availed was reflected in the periodic returns, and the freight-related data was available from the balance sheet and profit and loss account. These circumstances showed departmental knowledge of the relevant facts and negatived any allegation of suppression for invoking the extended period.

Conclusion: The extended period was not invocable and the demand on limitation was unsustainable.

Final Conclusion: The impugned demand was set aside on merits and on limitation, and the appeal was allowed with consequential relief.

Ratio Decidendi: Where outward freight is borne by the manufacturer under a destination-sale arrangement and the evidence shows delivery and transfer of ownership at the buyer's premises, credit on the related service tax is admissible; the extended period cannot be invoked absent suppression of material facts known to the department.

---