Exemption for phosphorus inputs under Notification No. 43/88-C.E. applies where goods are used in making pesticide products through intermediates.

Notification No. 43/88-C.E. granted exemption to specified Chapter 28 or 29 goods used in manufacturing goods under sub-heading 3808.10, and its Annexure permitted use in another factory where Chapter X procedure was followed. White phosphorus was expressly covered, yellow phosphorus was treated as the same substance for practical purposes, and the named intermediates were also within the notification. Direct use without intermediates was not required. The exemption conditions were satisfied on the record, so the Department's challenge failed.

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Issues: Whether white/yellow phosphorus and the intermediate products phosphorus trichloride, phosphorus pentasulphide and trimethyl phosphite were entitled to exemption under Notification No. 43/88-C.E. dated 01.03.1988 when used in the manufacture of goods falling under sub-heading 3808.10, and whether the benefit could be denied because the goods were not used directly in the manufacture of pesticides/insecticides or because the use was in another factory following Chapter X procedure.

Analysis: Notification No. 43/88-C.E. exempts the goods specified in its Annexure, falling under Chapter 28 or 29, when used in the manufacture of goods falling under sub-heading 3808.10, and the proviso in the Annexure permits use elsewhere than in the factory of production if Chapter X procedure is followed. White phosphorus was specifically covered by the notification, and yellow phosphorus was treated as the same substance for practical purposes. The notification also named the intermediate products produced in the process. The requirement was use in the manufacture of pesticides/insecticides under sub-heading 3808.10, not necessarily direct and immediate use without intermediates. The record also showed compliance with the Chapter X procedure where applicable. Reading Notification No. 43/88-C.E. together with Notification No. 217/86-C.E., the conditions for exemption were satisfied.

Conclusion: The exemption was rightly available and the Department's challenge failed.

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