Pre-commissioning trial runs can qualify for concessional duty when inputs are used in essential manufacture-related commissioning stages.

Raw naphtha used in essential trial runs and pre-commissioning of a new fertilizer plant was treated as falling within the intended use in manufacture for concessional duty under Notification No. 75/84-C.E. The decision applied the principle that manufacturing includes necessary commissioning-stage operations, so inputs consumed before regular production may still qualify where they are integral to setting up production of the notified product. On that basis, the pre-commissioning consumption of raw naphtha was held eligible for the concessional rate.

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Issues: Whether raw naphtha used during trial runs and pre-commissioning of a fertilizer plant was entitled to the concessional rate of duty under Notification No. 75/84-C.E. despite the plant not having commenced regular production.

Analysis: The concession under the notification was considered in the light of the principle that material used in the necessary trial runs of a plant set up for manufacture of fertilizers can fall within intended use in manufacture. The decision relied on the ratio that the manufacturing process includes essential trial and commissioning stages, and also drew support from the treatment given in earlier cases where a strict notification was applied beneficially to pre-commissioning use. On that basis, raw naphtha consumed in trial runs of the new fertilizer plant was treated as qualifying for the notified concessional rate.

Conclusion: The issue was decided in favour of the assessee; raw naphtha used during trial runs of the fertilizer plant qualified for the benefit of Notification No. 75/84-C.E.

Ratio Decidendi: Goods or inputs used in essential pre-commissioning trial runs of a plant intended for manufacture of the notified product may satisfy the requirement of intended use in manufacture for concessional duty benefits under the relevant notification.

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