Modvat credit and process loss: inputs wasted during manufacture did not justify denial of credit.

Modvat credit was not to be denied where inputs were lost during manufacture of an intermediate product because of leakage in a storage tank. The loss was treated as process loss arising in the course of manufacture, so credit remained available even though part of the input was wasted in production. The Tribunal distinguished the Revenue's relied-upon authority on the basis that it concerned loss before raw material was issued for production. Credit was therefore allowed, with consequential relief to the appellants.

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Issues: Whether Modvat credit was to be denied in respect of inputs lost during manufacture of an intermediate product due to leakage in the storage tank.

Analysis: The loss occurred in the course of manufacture and was treated as process loss. Credit was not to be denied merely because part of the input went into the production process and was wasted. The Tribunal distinguished the authority relied upon by the Revenue on the ground that it concerned loss before issue of raw material for production.

Conclusion: Modvat credit could not be denied. The appeals were allowed with consequential relief to the appellants.

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