Intended for use under an exemption notification does not require direct consumption where power supports fertilizer manufacture.

Furnace oil cleared under Notification No. 75/84-C.E. qualified for concessional duty where it was used as supportive fuel in a 35 MW plant dedicated to the fertilizer unit and the Chapter X procedure was followed. Direct physical consumption in the fertilizer plant was not required because the generated power was pooled in a common grid, the other plants were coal-fired, the fertilizer unit's demand exceeded the 35 MW output, and there was no finding of diversion to non-manufacturing use. The notification's phrase "intended for use" was satisfied by use for the purpose and with the intention of manufacturing fertilizer.

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Issues: Whether furnace oil cleared under Notification No. 75/84-C.E. was eligible for concessional rate of duty when the power generated from its use in the 35 MW plant was pooled in a common grid and distributed to the fertilizer unit.

Analysis: The concessional notification required proof that the furnace oil was intended for use otherwise than as feed stock in the manufacture of fertilizers, and that the Chapter X procedure was followed where applicable. The Chapter X procedure was admittedly complied with. The denial of benefit was based on the fact that the power generated from the furnace oil was not directly fed to the fertilizer plant but was pooled with other generated power in a common grid. However, the furnace oil was used only as supportive fuel in the 35 MW plant dedicated to the fertilizer unit, the other power plants were coal-fired, the fertilizer unit's power requirement exceeded the output of the 35 MW plant, and there was no finding that the generated power was diverted to office or domestic use. The expression 'intended for use' does not require actual direct consumption in the fertilizer plant, but use for the purpose and with the intention of manufacturing fertilizer.

Conclusion: The condition in the notification stood satisfied and the assessee was entitled to concessional duty on furnace oil.

Ratio Decidendi: For exemption notifications using the phrase 'intended for use', direct and physically identifiable consumption in the end manufacturing unit is not necessary if the goods are used for the purpose and with the intention of manufacturing the exempted product and the prescribed procedure is followed.

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