CENVAT credit on invoice quantity allowed where transit shortage of molasses stayed within permissible natural loss tolerance.

CENVAT credit on the invoice quantity was allowable where molasses were short received in transit, because the shortage was only 0.87% and remained within the recognised tolerance for natural transit loss under the applicable molasses rules. The Tribunal accepted that evaporation and other natural causes can account for such variation, and held that credit cannot be denied when the discrepancy stays within the permissible limit. The assessee was therefore entitled to avail credit on the invoice quantity despite the short receipt.

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Issues: Whether CENVAT credit on molasses could be availed on the invoice quantity despite short receipt during transit, where the shortage was within the permissible limit.

Analysis: The shortage in receipt of molasses was not disputed, but the variation was only 0.87%. The Tribunal noted that transit loss due to natural causes, including evaporation, was permissible within the recognized limit under the applicable molasses rules. It also relied on the principle that credit cannot be denied where the quantity variation remains within the permissible tolerance for transit loss.

Conclusion: The assessee was entitled to take credit on the invoice quantity, as the shortage was within the permissible limit.

Ratio Decidendi: Where inputs are short received in transit but the shortage remains within the permissible tolerance for natural transit loss, CENVAT credit on the invoice quantity is allowable.

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