Captive use of input for steam generation in fertilizer manufacture can qualify for concessional excise treatment.

Low sulphur heavy stock received under Chapter X procedure and used captively to generate steam for fertilizer manufacture was treated as eligible for exemption or concessional treatment under the relevant notification and Rule 192. The input was not required to remain physically in the finished product or to be directly used in its production, because its use in generating steam formed an essential part of the manufacturing process. Relying on prior administrative and tribunal decisions, the demand was found unsustainable and the assessee was held entitled to the concessional benefit.

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Issues: Whether low sulphur heavy stock received under Chapter X procedure and used captively for generation of steam in the manufacture of fertilizers remained eligible for exemption or concessional treatment under the relevant notification and Rule 192.

Analysis: The steam generated from the input was not sold or supplied outside the factory and was used as an essential requirement in the manufacture of fertilizers. The use of the input in producing steam for the manufacturing process was treated as sufficient for the benefit of the notification, since the input need not physically remain in the finished product and need not be directly used in its production. Support was drawn from the earlier administrative and tribunal decisions relied upon in the order.

Conclusion: The demand was not sustainable and the assessee was held entitled to the concessional benefit.

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