2008 (3) TMI 111 - AT - Service Tax

Credit of tax paid on outward freight - Circular 97/8/2007 clarified that credit of service tax paid on transportation is admissible where ownership of goods remained with seller till delivery of goods plea whether the appellants has paid excise duty after taking into consideration TV on FOR basis is not considered by lower authorities while denying credit - whether the disputed freight formed part of the AV, is required to be verified matter remanded

Summary

Issues:
1. Disallowance of Cenvat Credit on outward freight.
2. Interpretation of assessable value and eligibility of service tax credit on transportation.
3. Relevance of ownership of goods in determining credit eligibility.

Analysis:
The appeal was filed against the disallowance of Cenvat Credit on service tax paid for outward freight. The appellants argued that since they were paying duty on Free on Rail (FOR) price, they were entitled to credit for outward freight. They cited a CBEC Circular and a previous Tribunal decision to support their claim. The Revenue contended that since the place of removal was the factory gate, service tax on freight beyond that point was not eligible for credit as it was unrelated to the manufacture of goods.

The Tribunal noted that the appellants included the cost of freight in the assessable value of goods based on the FOR price, but this crucial fact was not addressed in the lower authorities' findings. Referring to the CBEC Circular, the Tribunal emphasized that credit for service tax on transportation is permissible when the ownership of goods remains with the seller until delivery. Additionally, a previous Tribunal case was cited where it was held that if the disputed freight was part of the assessable value and duty was paid on it, then credit for service tax on outward transport would be available.

Given the lack of consideration regarding whether the appellants paid excise duty based on the transaction value on an FOR basis, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for further examination. The Tribunal directed the authority to verify this crucial aspect and make a decision in accordance with the law after providing the appellants with an opportunity to be heard.