Exemption for sulphuric acid used in fertilizer manufacture extends to essential process inputs and intermediates, not only final ingredients.

Sulphuric acid used in the manufacture of phosphoric acid and SHMP was treated as covered by Notification No. 81/75 because exemption depended on its use in an essential process connected with fertilizer production, not on the acid becoming part of the final fertilizer. Water treatment necessary for fertilizer manufacture was also regarded as within the notification, and the fact that phosphoric acid was an intermediate, separately classifiable product did not defeat the claim. The earlier departmental view was held inconsistent with the notification's scope, and the duty demand and penalty were set aside in favour of the assessee.

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Issues: Whether sulphuric acid used in the manufacture of phosphoric acid and SHMP, including the treatment of water used in fertilizer production, qualified for exemption under Notification No. 81/75 as sulphuric acid used in the manufacture of fertilizers.

Analysis: The exemption was held to depend on the use of sulphuric acid in an essential process connected with fertilizer manufacture, and not on the acid itself becoming an ingredient of the final fertilizer product. The treatment of water was treated as a necessary pre-requisite for its use in fertilizer production, and the fact that phosphoric acid was an intermediate and separately classifiable product did not defeat the exemption claim. The earlier departmental reasoning was found inconsistent with the scope of the notification.

Conclusion: The use of sulphuric acid in the present process was covered by Notification No. 81/75, and the duty demand and penalty were set aside in favour of the assessee.

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