Cenvat credit on intra-unit transfers and normal transit loss cannot be denied where duty payment and receipt are established.

Cenvat credit on duty-paid molasses transferred within the same premises was held admissible even though the movement was supported by non-statutory challans or bills, because physical receipt and duty payment were established and the transfer document's form did not defeat substantive entitlement. Credit was also held not to be disallowable for molasses lost in transit before receipt in the chemical division, since the loss was treated as normal incidental loss in the course of movement and handling. On both counts, the assessee was found entitled to credit and consequential relief.

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Issues: (i) Whether Cenvat credit was admissible on molasses transferred from the sugar division to the chemical division on the strength of non-statutory challans or bills. (ii) Whether Cenvat credit was disallowable on molasses lost in transit before receipt in the chemical division.

Issue (i): Whether Cenvat credit was admissible on molasses transferred from the sugar division to the chemical division on the strength of non-statutory challans or bills.

Analysis: The inputs had been duty paid and physically transferred within the same premises from one unit to another. The earlier decision between the same parties had accepted credit where duty payment and receipt of molasses were not in dispute, and the only objection was that the documents stood in the name of the assessee itself. On that reasoning, the form of the transfer document did not defeat entitlement to credit where substantive receipt and duty payment were established.

Conclusion: The credit was admissible and the disallowance on this ground was not sustainable, in favour of the assessee.

Issue (ii): Whether Cenvat credit was disallowable on molasses lost in transit before receipt in the chemical division.

Analysis: The quantity lost was admittedly less than 1%, which was treated as normal loss in transit. Normal transit or storage loss does not warrant denial of credit where the loss is incidental to the movement and handling of the inputs and the goods are otherwise meant for use in manufacture. The loss was therefore treated as part of the ordinary business process and not as a separate ground to deny credit.

Conclusion: The credit was not disallowable on account of such normal transit loss, in favour of the assessee.

Final Conclusion: The appeal succeeded in full and the assessee was held entitled to Cenvat credit on both counts, with consequential relief according to law.

Ratio Decidendi: Where duty-paid inputs are physically received and transferred within the assessee's units, credit cannot be denied merely because the transfer document is a non-statutory challan, and normal transit loss of inputs does not by itself justify denial of Cenvat credit.

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