Feed stock exemption in fertilizer manufacture is limited to primary raw material use; steam-generation use gets only concessional treatment.

Exemption notifications for fertilizer manufacture granted complete relief only where low sulphur heavy stock was used as feed stock, meaning the primary raw material introduced into the processing plant. Material used to generate steam in the manufacturing process did not, by itself, qualify as feed stock, so that quantity was not entitled to full exemption under the earlier notifications. The later notification specifically extended concessional treatment to that steam-generation use from 1 March 1988. Only the quantity actually used as feed stock qualified for complete exemption, while the steam-use quantity received the later specified benefit.

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Issues: Whether low sulphur heavy stock used in the manufacture of fertilizers, including use for generating steam in the production process, was entitled to complete exemption under the relevant exemption notifications, and the extent to which such use qualified as use as feed stock.

Analysis: The notifications granted full exemption only where the heavy petroleum stock was intended for use as feed stock in the manufacture of fertilizers, while a lower or different duty treatment applied where it was used otherwise than as feed stock but still in fertilizer manufacture. Feed stock was treated as the primary raw material introduced into the processing plant. On the facts, the material was used in two distinct ways: one part as feed stock in the chemical process leading to ammonia and fertilizer manufacture, and another part for generating steam, which was also used in the overall manufacturing process but did not itself amount to use as feed stock. The later notification specifically covered the latter category by granting the appropriate concessional treatment from the date it came into force.

Conclusion: Only the quantity of low sulphur heavy stock actually used as feed stock qualified for complete exemption under the earlier notifications, while the quantity used for generating steam did not. Under the later notification, the assessee was entitled to the benefit applicable to that use from 1 March 1988. The result was therefore partly in favour of the assessee.

Ratio Decidendi: In exemption notifications relating to fertilizer manufacture, complete exemption is confined to the quantity of petroleum stock used as feed stock, and use of the same material for generating steam in the manufacturing process does not, by itself, constitute use as feed stock.

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