Sulphuric Acid exemption applies when first used to make Phosphoric Acid, if ultimate fertilizer use is proved.

Sulphuric Acid intended for use in fertilizer manufacture remained eligible for exemption under Notification No. 81/75-C.E. even where it was first used to produce Phosphoric Acid, provided the Phosphoric Acid was ultimately used in manufacturing fertilizers. The accepted factual position was that the Sulphuric Acid produced by the assessee was converted into Phosphoric Acid and the entire quantity was finally consumed in fertilizer production. A departmental clarification also confirmed that the exemption continues in such a chain of use when the ultimate fertilizer use is established. On that basis, the exemption was allowed and the duty demand was not sustainable.

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Issues: Whether Sulphuric Acid used in the manufacture of Phosphoric Acid, which was ultimately used in the manufacture of fertilizers, remained eligible for exemption under Notification No. 81/75-C.E. dated 22.03.1975.

Analysis: The exemption under the notification was directed to Sulphuric Acid intended for use in the manufacture of fertilizer. The factual position accepted in the order was that the Sulphuric Acid produced by the appellant was converted into Phosphoric Acid and the entire quantity was ultimately used in the manufacture of fertilizers. The departmental clarification of 12.12.1986 specifically stated that the exemption would remain available where Sulphuric Acid is first used to manufacture Phosphoric Acid and that Phosphoric Acid is then used in the manufacture of fertilizers, so long as the ultimate use in fertilizer manufacture is established.

Conclusion: The exemption was held to be available and the duty demand was not sustainable. The assessee succeeded.

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