Volatile goods and natural storage loss: CESTAT treated rectified spirit wastage as inherent, not requiring credit reversal.

Rectified spirit being a volatile product, natural storage loss was treated as inevitable wastage rather than a loss requiring cenvat credit reversal. The absence of an express Central Excise provision or Board circular on storage loss did not, by itself, justify denial of relief where the loss was shown to be inherent and reasonable. The Tribunal relied on the comparable recognition of storage loss under State Excise norms and on prior decisions concerning rectified spirit and invisible losses. On that basis, the demand for reversal of credit on the quantity lost in storage was held unsustainable.

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Issues: Whether cenvat credit was required to be reversed on the quantity of rectified spirit lost during storage as wastage.

Analysis: Rectified spirit is a volatile product and some loss in storage is inevitable by natural causes. The absence of an express Central Excise provision or Board circular on storage loss did not justify rejection of the claim outright. The loss claimed was treated as comparable to permissible storage loss recognised under State Excise norms and was consistent with the view taken in prior Tribunal decisions dealing with rectified spirit and invisible losses.

Conclusion: The assessee was entitled to treat the storage loss of rectified spirit as wastage, and the demand for reversal of cenvat credit of Rs. 1,06,312/- was unsustainable.

Final Conclusion: The impugned order was set aside to the extent it confirmed reversal of credit on the rectified spirit loss, and the appeal succeeded.

Ratio Decidendi: Where the finished goods are volatile and storage loss is a natural consequence of their nature, the assessee cannot be denied relief merely because the Central Excise law does not contain an express storage-loss provision, if the loss is otherwise shown to be inherent and reasonable.

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