Input exemption for technical grade urea upheld where product substantially matched fertiliser grade urea.

Ammonia, furnace oil and LSHS used in making urea cleared as technical grade urea were treated as inputs used in the manufacture of fertilisers because technical grade urea was found substantially the same as fertiliser grade urea, with the difference confined to the sieving process for obtaining prills. On that basis, the inputs qualified for exemption under Notifications No. 145/71 and 147/74. The limitation question was not examined after the exemption issue was resolved in favour of the assessee.

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Issues: Whether ammonia, furnace oil and LSHS used in the manufacture of urea were entitled to exemption under Notification No. 145/71 dated 26-7-1971 and Notification No. 147/74 dated 30-10-1974 when the product was cleared as technical grade urea.

Analysis: The specifications of technical grade urea and fertiliser grade urea showed that the product manufactured by the respondents was substantially the same and that technical grade urea would automatically satisfy the fertiliser grade specification. The difference lay only in the sieving process for obtaining the required prills. On that basis, the inputs were treated as having been used in the manufacture of fertilisers. Since the principal controversy on exemption was resolved in favour of the respondents, the question of limitation was not gone into.

Conclusion: The inputs were used in the manufacture of fertilisers and the respondents were entitled to the benefit of both exemption notifications.

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