Cenvat credit on molasses loss remains admissible where the loss is negligible and within permissible storage tolerance.

Cenvat credit could not be reversed on molasses loss where the reported quantity matched monthly storage losses recorded for State Excise purposes rather than any actual transit loss. Once treated as storage loss, the loss fell within the permissible tolerance and did not justify denial of credit. Even if characterised as transit loss, the negligible percentage meant credit still remained admissible under the settled view excluding reversal for insignificant loss. The demand for reversal was therefore unsustainable, and relief was allowed to the appellant.

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Issues: Whether Cenvat credit was deniable on loss of molasses said to be transit loss, and whether the loss could instead be treated as storage loss within the permissible tolerance.

Analysis: The reported quantity of loss was found to correspond to the monthly storage losses reflected in the records maintained for the State Excise authorities, rather than to any actual transit loss. On that basis, the loss was accepted as storage loss. Once so characterised, credit could not be denied in view of the settled position that storage loss of molasses, when within the permissible limit, does not warrant reversal of Cenvat credit. The same result would follow even if the loss were treated as transit loss, since the percentage was negligible and the applicable judicial view excludes denial of credit for such insignificant loss.

Conclusion: The demand for reversal of Cenvat credit was unsustainable and the appellant was entitled to relief.

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