The judge has held that an exemption at 55.141 (now at 555.141) has been treated as historically applicable for rocket motors, and therefore must be honored (in the absence of rules not currently in existence).
Since section 55.141 grants exemption from "this part", i.e., part 55, this would mean that all of the requirements which might otherwise fall on the material by virtue of regulations therein are affected.
- -- - It is in part 55 that the manufacturing and sales licensing (as well as user permit and storage) requirements are stipulated. This means that the exemption applies to the creation and distribution, as well as the possession-for-use, of the completed Propellant Actuated Device. - -- -
If I make propellant, assemble it in a casing, and install a nozzle, I'm manufacturing an exempt device. Thus, no manufacturer's license (that might otherwise be required by part 55) is required to make and sell it, nor any permit to acquire or use it... at no point has "manufacturing or commerce in explosives" been part of the process.
There exists no basis in equity to claim that propellant-for-PAD's would turn into "Explosives" at some point, simply because the person who placed the propellant in the casing was not the same entity as the one who mixed and cast the propellant itself. These are simply different steps in the process of creating an exempt device.
If the BATF were to claim, "oh, we're not stopping people from using PAD's, just the propellant for them", I suspect a judge might be somewhat Not Amused, although he would probably find more courteous and formal language than "bogus chickenshit nitpicking" to describe such an attempt. (Judges seem to be good at that.)
In other words, let's quit splitting hairs and take "yes" for an answer already.