Modvat credit on transit loss from evaporation remained admissible, with no reversal required for the short receipt.

Modvat credit on inputs received under invoice remained admissible despite a 2% transit shortage caused by evaporation loss, because transportation, handling, pumping and transfer of raw materials were treated as processes in or in relation to manufacture. The loss in transit did not justify denial of credit or reversal of any proportionate amount, and the demand for reversal was rejected.

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Issues: Whether Modvat credit was admissible on the full quantity of inputs received under invoice, notwithstanding a 2% shortage caused by evaporation loss in transit, and whether the proportionate credit was required to be reversed.

Analysis: The disputed shortage in the input quantity was attributable to evaporation loss during transportation. Transportation, handling, pumping and transfer of raw materials were treated as processes in or in relation to manufacture, and the credit was claimed on the duty paid under the invoice for the inputs received. On that basis, the quantity lost in transit did not justify denial or reversal of proportionate credit.

Conclusion: The entire credit of duty on inputs lost in transit was held admissible, and the demand for reversal of proportionate credit was rejected.

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