Intended-use exemption for raw naphtha survived process interruption when fertiliser manufacture failed due to operational constraints.

An exemption notification tied to intended use was interpreted by reference to the purpose for which raw naphtha entered the manufacturing process, not the ultimate production of fertiliser in every case. The concession could not be denied merely because reforming gas had to be vented out due to power shortages and other operational constraints, where the input was brought into the plant for fertiliser manufacture and there was no misuse. The notification was read consistently with its object of lowering fertiliser input costs, and the concessional exemption remained available despite the interruption of the process.

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Issues: Whether raw naphtha cleared at a concessional rate under the exemption notification remained eligible for the concession when, because of power shortages and operational constraints, the reformed gas produced from it had to be vented out and fertiliser was not actually produced.

Analysis: The exemption notification required proof that the raw naphtha was intended for use in the manufacture of fertiliser. The controlling question was therefore the purpose and intention with which the input was brought into the plant, not whether the manufacturing process ultimately yielded fertiliser in every instance. Rule 196(1) of the Central Excise Rules, 1944 did not warrant a narrower reading that would deny the concession merely because the interim product had to be vented out for reasons beyond the assessee's control. The notification was to be construed in a manner consistent with its object of reducing the cost of fertiliser inputs, especially where the non-production of fertiliser resulted from supervening operational constraints and not from misuse of the input.

Conclusion: The raw naphtha was treated as having been used for the intended manufacture of fertiliser, and the concessional exemption remained available to the assessee.

Ratio Decidendi: Where an exemption notification turns on intended use, the concession cannot be denied merely because the manufacturing process was interrupted by circumstances beyond the assessee's control and no final product emerged, so long as the input was brought into the process for the notified manufacturing purpose.

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