XSLT Getting two different output for same input XML for same XSL

Question

I have been trying my XSLT code in the online tool [XSLT 1.0 processor]:

http://www.freeformatter.com/xsl-transformer.html

Recently, I had to make

Answer 1

Output 2 is correct. I ran your example in Oxygen/XML, using both XSLT1 and XSLT2 and got the correct results for both. Your template

eliminates the empty nodes in both XSLT1 and XSLT2.

Therefore the only possible conclusion is that the online tool that produced your Output 1 has a bug.