Exemption for ammonia depends on actual use in fertilizer manufacture; tariff classification alone does not satisfy the notification.

An exemption for ammonia under Notification No. 40/85 applied only where the ammonia was used in the manufacture of fertilizers. Although molten urea remained tariff-classified as fertilizer after the Chapter 31 note amendment, that classification did not satisfy the notification's requirement of actual use, because the molten urea was used as an intermediate for melamine, which is not a fertilizer. The main exemption was therefore unavailable. The alternative claim under Notification No. 217/86 had not been examined by the lower authorities, so that claim was remanded for fresh consideration in light of the earlier order and the governing law.

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Issues: (i) Whether ammonia used in the manufacture of molten urea, which is further used for manufacture of melamine, was eligible for exemption under Notification No. 40/85 dated 17-3-1985. (ii) Whether the alternative claim for benefit under Notification No. 217/86 dated 2-4-1986 required reconsideration.

Issue (i): Whether ammonia used in the manufacture of molten urea, which is further used for manufacture of melamine, was eligible for exemption under Notification No. 40/85 dated 17-3-1985.

Analysis: The exemption was confined to ammonia used in the manufacture of fertilizers. After the amendment to Chapter Note 1 of Chapter 31 with effect from 1-3-1987, molten urea remained classifiable as fertilizer for tariff purposes, but that did not alter the notification language governing the actual use of ammonia. The use of molten urea as an intermediate for melamine, which is not a fertilizer, meant the statutory condition for exemption was not satisfied.

Conclusion: The benefit of Notification No. 40/85 was not available to the assessee.

Issue (ii): Whether the alternative claim for benefit under Notification No. 217/86 dated 2-4-1986 required reconsideration.

Analysis: The alternative notification had already been recognized as applicable subject to satisfaction of its conditions, but the authorities below had not examined that claim. The proper course was to remit the matter so that the claim could be considered in the light of the earlier order and the governing law.

Conclusion: The claim under Notification No. 217/86 was remanded for fresh consideration.

Final Conclusion: The assessee did not succeed on the main exemption claim, but obtained a remand on the alternative notification claim, leaving the matter partly in its favour.

Ratio Decidendi: Where an exemption notification conditions relief on actual use in manufacture of fertilizers, the benefit cannot be extended merely because an input is used in producing an intermediate product that is itself tariff-classified as fertilizer; an alternative exemption claim not examined by the lower authorities may be remitted for reconsideration.

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