Strict construction of fertilizer exemption denies relief where ammonia is used for an intermediate product leading to melamine.

Exemption notifications for ammonia used in the manufacture of fertilizer were construed strictly and applied only where ammonia was ultimately consumed in producing fertilizer. Ammonia used to make molten urea, which was then used captively in the manufacture of melamine, did not qualify because molten urea was only an intermediate product and melamine was not a fertilizer. The claimed Chapter 31 classification of molten urea did not by itself establish eligibility, and the record did not show that molten urea was understood in trade as a fertilizer. The exemption and concessional duty claim was therefore rejected.

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Issues: Whether ammonia used in the manufacture of molten urea for captive use in the manufacture of melamine was eligible for exemption or concessional duty under the notifications meant for ammonia used in the manufacture of fertilizer.

Analysis: The notifications were construed strictly and their benefit was held to depend on the ultimate use of ammonia in the manufacture of fertilizer. The fact that molten urea was claimed to be classifiable under Chapter 31 did not by itself determine eligibility, because Chapter Notes 1 and 2 of Chapter 31 apply only to mineral or chemical fertilizers, and the record did not establish molten urea as a fertilizer in trade understanding. Since molten urea was only an intermediate product in the continuous process leading to melamine, and melamine was not a fertilizer, the end product requirement in the notifications was not satisfied. The classification of molten urea was also noted to be open to reconsideration, but that question was not ative for the exemption claim.

Conclusion: The notifications did not apply and the exemption or concessional duty claim was rejected.

Ratio Decidendi: An exemption notification granting benefit for ammonia used in the manufacture of fertilizer applies only where the ammonia is ultimately used for producing fertilizer, and not where it is consumed in making an intermediate product leading to a non-fertilizer final product.

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