Feedstock exemption through an intermediate product requires proof of actual end use in fertilizer manufacture before concession is granted.

Notification No. 147/74 could extend to heavy petroleum stock used first to produce ammonia and then transferred under Chapter X for fertilizer manufacture in another unit, because the notification did not require the feedstock to be consumed in the same factory. The concession still depended on proof that the ammonia derived from the concessional input was actually used in manufacturing fertilizer, and that the prescribed procedure was followed. As no verification of ultimate end use had been made, the concession could not be granted on the existing record and the matter was remanded for factual verification by the jurisdictional Assistant Collector.

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Issues: Whether the benefit of Notification No. 147/74 was available when heavy petroleum stock was used to manufacture ammonia in one unit and the ammonia was transferred under Chapter X procedure for use in the manufacture of fertilizer in another unit, and whether proof of actual utilisation for fertilizer was required before extending the concession.

Analysis: The notification exempted heavy petroleum stock intended for use as feedstock in the manufacture of fertilizers, subject to satisfaction of the Assistant Collector that the material was so used and that Chapter X procedure was followed. The wording did not require that the feedstock be consumed in the same factory where the intermediate product was made. Manufacture of fertilizer could involve intermediate stages, including production of ammonia. However, the condition of the notification still required proof that the ammonia produced from the concessional input was ultimately used in the manufacture of fertilizer. Since no verification had been made to establish that actual end use, the grant of concession without such verification was not justified.

Conclusion: The concession was not finally established on the existing record, and the matter required verification by the jurisdictional Assistant Collector. The appeal succeeded to that extent and the case was remanded for factual verification of end use.

Final Conclusion: The notification could cover use of the concessional input through an intermediate product, but only upon proof of actual utilisation in fertilizer manufacture and compliance with the prescribed procedure; the prior order was set aside and the matter sent back for verification.

Ratio Decidendi: A feedstock exemption conditioned on proof of use in fertilizer manufacture is available even where the input is first converted into an intermediate product and moved to another unit, but the exemption cannot be granted without verification of the ultimate end use as required by the notification.

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