Modvat credit on evaporated moisture from phospho gypsum remains admissible when duty was paid on the full received quantity.

Modvat credit was treated as admissible on moisture evaporated from phospho gypsum during storage and use in cement manufacture because the input had been received in full quantity on duty-paid invoiced weight, including moisture. The negligible moisture loss was characterised as evaporation due to atmospheric conditions and the manufacturing process, not as loss of the input itself before use. On that basis, the relevant quantity for credit remained the quantity received in the factory, and credit could not be denied merely because moisture later evaporated. The note aligns this approach with earlier Tribunal decisions treating such evaporation as admissible process loss.

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Issues: Whether Modvat credit is admissible on the moisture content lost by evaporation from phospho gypsum during storage and use in the manufacture of cement.

Analysis: The input was received in full quantity on payment of duty on the entire weight as invoiced by the supplier, including moisture content. The loss complained of was only negligible moisture loss arising from atmospheric conditions and during the manufacturing process, not a loss of the input itself before use. In such circumstances, the relevant quantity for Modvat purposes is the quantity received in the factory with duty paid thereon, and credit cannot be denied merely because part of the moisture evaporated. The reasoning was consistent with earlier Tribunal decisions treating such evaporation as admissible process loss.

Conclusion: Modvat credit on the moisture content lost by evaporation was held to be admissible, in favour of the assessee.

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