Concessional excise exemption for raw naphtha failed where gas was vented and not actually used in fertilizer manufacture.

Concessional raw naphtha under Notification No. 187/61 was contingent on compliance with Chapter X procedure, not merely an asserted intention to use it in fertilizer manufacture. The concession required satisfaction of the proper officer and actual use, or due accounting, in the manner stated in the application. Because the disputed quantity of gas was vented instead of being used in manufacture, and the loss was attributed to failure to use proper pumping machinery rather than technological necessity, the conditions of the notification and Rule 196(1) were not met. The disputed quantity therefore remained liable to duty, and the exemption was denied.

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Issues: Whether raw naphtha obtained at concessional rate under Notification No. 187/61 remained eligible for exemption when the gas generated from it was vented instead of being used in fertilizer manufacture, and whether the conditions of the notification and Rule 196(1) of the Central Excise Rules, 1944 were satisfied.

Analysis: The concession under the notification depended not merely on an asserted intention to use raw naphtha for fertilizers, but on satisfaction of the proper officer and compliance with the procedure under Chapter X. The record showed that the authorities had accepted the intended use at the time of issue, but the disputed quantity was not actually used in the manufacture of fertilizer during the relevant period. The venting of gas was found to be due to the appellants' failure to use proper pumping machinery and not due to technological necessity. As the goods were not duly accounted for as having been used for the purpose and in the manner stated in the application, Rule 196(1) attracted liability to duty.

Conclusion: The exemption was not available for the disputed quantity, and the demand of duty was upheld.

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