So Hitler and the Army didn't want to enact the mass extermination of civilians populations ... But Churchill did? Is this some strange alternate history?
I can play such game too and tell that UK started bombing first and did worst aerial bombing atrocities, disregarding the context.
I don't argue that however since the context of these events was rather specific and it's insensitive and dishonest to generalize it. And we do talk about it in context of gas weapons, where UK had intentions to resort to using it if needed and if battle would take place in Britain.
I daresay that the vast majority of the German military was quite content with exterminating the civilian population, whether by gas or other means. My evidence for this is that they did exactly that ...
The disregard for the civilian casualties and indifference (or in some cases direct and indirect participation) of military to the extermination of population and POWs wasn't the same as them
wanting to exterminate civilian population, at least during the war. I am not going to talk about wehrmacht's guilt in the actions of Germany, but they clearly weren't ones committing the worst crimes.
Another thing is that in case of UK it was Luftwaffe carrying out the attacks and it switching to indiscriminate terror wasn't a well-thought plan to exterminate all civilians. Indiscriminate bombing started as terror, to spread fear and demoralization first and foremost - and it was largely a political decision, decision that was reliant on Hitler who wouldn't like to approve gas weapons and where they weren't necessary.
Retroactively it makes sense that they could consider using them, but from their decision-making logic in 1940-1941 they had little need to consider it.
Later they didn't commit needed air power to perform such action against UK, Allies in UK had enough air power to fight back as war went on and the missiles Germans had would be unlikely to really cause enough damage with poison gas. Instead they focused on other things and in case of UK switched to attacks on the convoys and supply lines.
until they were stopped by the same Churchill whose name you besmear here.
I exaggerated, but Churchill was the most willing leader to use poison gas in WWII on the battlefields. He advocated for it's usage before WWII. And while Churchill never had genocidal intentions to seriously speak of, the usage of poison gas would likely to get out of hand and end no better or much worse than the aerial bombings.
Now, this said, all sides deployed the chemical weapons and in a bunch of major operations and periods kept stockpiles available to be deployed to battle on a short notice. Everyone was ready to use these weapons - perhaps with exception of USSR which lacked capacity for defense against it. However, in most cases it was military that didn't suggest using it... and in Germany, in cases like Leningrad and such, there was no political will.
Churchill had political will to use it and unlike Hitler he had no personal experience to that. But he wasn't bent on doing it for sake of terror, he would do it to defend his homeland and bring the end to the war he didn't start, unlike Hitler and even Stalin. That's the context and I don't think it besmears him.
The main problem for Germany was the delivery of chemical weapons. I suspect that they didn't do use it because it isn't a hugely effective weapon. You have to be able to deliver it in sufficient quantities and over a sufficient area. It worked well on the Western front of WW1 due to the relatively static nature.
I don't think that it was the only case. There were plenty of weapons for it and there was enough aircraft capacity... and, as always, a lot could be delivered by artillery for more static objects. Probably the biggest issue is that retaliation would mean that advantages from using it would be similarly balanced.
Eastern Front was the prime place to use it, perhaps even with UK retaliation on the mainland Germany it could be worth it in 1941. But that may depend on the exact war plans and, as we know, Germany didn't have political will for that.
But again, chemical weapons were rather traumatizing thing for public. Germany lacked political will and many WWI officers would probably detest being ones to deploy poison gases first as it would make any side much more amoral. In first stages of war, in 1941 too it was very important. We must keep in mind that Nazi Germany wasn't perceived as "the bad guy" yet in many neutral places including US, a lot because of general public not knowing the extent of Nazi policies. If you look in 1941-1944, Nazis did a lot to cast shadow on Soviets for real and made-up reasons to win the public opinion, tried to undermine the Allied governements and etc which required active counter to that from their side. In that context, using poison gas would be severily harming to the public relations with no clear military advantages from it (unlike, say, atomic weapons today).
Is this a genuine reason though or just an urban legend?
I would assume that industrial capacity and priorities of making tanks, bullets and bombs made this a lower priority.
Poison gases were manufactured during the war. In fact, both Allies and Axis delivered them near the frontlines on number of occasions in order to be ready to use them. Nor chemical factories that made them would be really taking away from tanks or bullets.