Exemption for inputs used in fertilizer manufacture cannot be denied solely because the final product falls under a different tariff chapter.

An exemption under Notification No. 4/2006-C.E. covered sulphuric acid used in the manufacture of fertilizers where the notification defined "fertilizers" by reference to the Fertilizer (Control) Order, 1985. Prior Tribunal rulings had treated zinc sulphate as covered by that Order and had held that exemption cannot be denied merely because the final product is classified under a tariff heading other than the fertilizer chapter, if the notification does not impose such a classification . On that reasoning, the exemption was available and the Revenue's objection based on Chapter 28 classification failed.

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Issues: Whether sulphuric acid used in the manufacture of zinc sulphate (agricultural grade) was eligible for exemption under Notification No. 4/2006-C.E. when the Revenue contended that zinc sulphate, being classifiable under Chapter 28, could not be treated as a fertilizer.

Analysis: The notification exempted sulphuric acid used in the manufacture of fertilizers and explained the expression "fertilizers" by reference to the Fertilizer (Control) Order, 1985. The prior Tribunal decisions had held that classification of the end product under a particular tariff heading is not a condition for extending the exemption where the notification does not impose such a requirement. Those decisions had also recognized that zinc sulphate is covered by the Fertilizer (Control) Order, 1985. The notification in issue contained the same explanatory framework and did not require the fertilizer to be classifiable under Chapter 31.

Conclusion: The assessee was entitled to the exemption and the Revenue's objection failed.

Ratio Decidendi: Where an exemption notification defines the relevant expression by reference to another statutory order and does not make tariff classification a condition of exemption, the benefit cannot be denied merely because the final product is classified under a different chapter of the tariff.

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