Integrated fertilizer manufacture: furnace oil and heavy petroleum stock counted as inputs, but not as feed stock for nil-rate exemption.

Furnace oil and heavy petroleum stock used in a methanol plant and steam generation plant were treated as inputs used in an integrated fertilizer manufacturing process, so they qualified as used in relation to the manufacture of fertilizer. However, the Tribunal held that steam-generation use did not amount to use as feed stock for the nil-rate exemption under the notification. The inputs therefore did not qualify for nil rate duty as feed stock, and only the concessional rate applicable to use otherwise than as feed stock was available.

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Issues: Whether furnace oil and heavy petroleum stock used in the methanol plant and in the steam generation plant could be treated as used in the manufacture of fertilizer, and whether such use qualified them as feed stock for nil rate of duty under the relevant exemption notification.

Analysis: The use of furnace oil and heavy petroleum stock in the appellant's manufacturing process was not disputed. The Tribunal applied the principle that inputs used in an integrated fertilizer manufacturing process, including for ammonia-related intermediary operations and steam generation, are to be regarded as used in the manufacture of fertilizer. However, on the specific question whether these inputs were used as feed stock, the Tribunal followed the earlier view that steam-generation use does not amount to feed stock use for fertilizer manufacture.

Conclusion: The inputs were accepted as used in relation to the manufacture of fertilizer, but they were not accepted as feed stock for nil rate exemption. The appellant was held entitled only to the concessional rate applicable to use otherwise than as feed stock.

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