Regenerated ammonia and fertilizer exemption apply only to actual use in manufacture, not to the original consumed input.

Ammonia originally used in the manufacture of molten urea was treated as fully consumed in that process, so the substance recovered on decomposition was a regenerated product and not the same input for exemption purposes. The regenerated ammonia was therefore liable to fresh excise duty, but exemption under Notification No. 145/71-CE was available only to the extent that the regenerated ammonia was actually used in the manufacture of fertilizers. The limited relief turned on actual end use, not on automatic identity with the original ammonia.

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Issues: Whether ammonia regenerated after decomposition of molten urea retained its identity as the original ammonia used in manufacture, and whether such regenerated ammonia qualified for exemption under Notification No. 145/71-CE when used in the manufacture of fertilizers.

Analysis: The exemption notification was interpreted as applying to ammonia used for manufacture of fertilizers falling under Tariff Item 14HH. The ammonia originally used in the manufacture of molten urea was held to be fully consumed in that process. On decomposition of molten urea, the substance that re-emerged was treated as a regenerated product and not the same ammonia originally consumed. That regenerated ammonia was therefore regarded as a new product liable to fresh excise duty. At the same time, the exemption was held available to the extent the regenerated ammonia sent back to storage was actually used in the manufacture of fertilizers.

Conclusion: The regenerated ammonia was not the original ammonia used in the manufacture of molten urea, but exemption was available only to the extent it was used in the manufacture of fertilizers. The assessee succeeded only to that limited extent.

Ratio Decidendi: An exemption limited to use in manufacture of fertilizers applies only when the material is actually used for that purpose, and a regenerated product emerging after decomposition is not automatically treated as the original input for exemption purposes.

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