End-use based excise exemption for fertilizer manufacture cannot be denied because downstream use may also be industrial.

Concessional duty under Notification No. 187/61-C.E. and Notification No. 75/84-C.E. was available where raw naphtha was brought under Chapter X procedure and used to manufacture ammonia for captive consumption in producing di-ammonium phosphate, ammonium sulphate and urea. The prescribed end-use condition was satisfied because the intermediate and final products were fertilizers, and exemption could not be denied merely on the basis that the products might later be sold or used for industrial purposes. The article relies on the earlier Supreme Court view that a restricted meaning should not be read into the notifications by reference to downstream use.

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Issues: Whether raw naphtha brought under Chapter X Procedure and used in the manufacture of ammonia, which was captively consumed in the manufacture of Di-ammonium Phosphate, Ammonium Sulphate and Urea, qualified for the concessional rate of duty under Notification No. 187/61-C.E. and Notification No. 75/84-C.E. despite the department's objection that the end use was industrial or commercial and not agricultural.

Analysis: The concessional notifications turned on satisfaction of the prescribed end-use condition. The goods manufactured from ammonia were admittedly fertilizers, and the fact that they might also be sold or used further for industrial purposes did not by itself negate the exemption where the fertilizer character of the intermediate products had emerged in the manufacturing process. The earlier Supreme Court ruling on the same assessee and the same exemption notification had already held that the benefit could not be denied by importing a restricted meaning into the notification or by relying on a later downstream use of the product.

Conclusion: The end-use condition was satisfied and the respondents were entitled to the benefit of the notifications; the Revenue's appeal failed.

Ratio Decidendi: Where the exempted notification requires use in the manufacture of fertilizer, the benefit cannot be denied merely because the resulting fertilizer may also be dealt with or used for non-agricultural purposes after it emerges from the manufacturing process.

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