Liberal construction of "manufacture" in small-scale industry tax exemption scheme supports eligibility for repacking activity.

A sales tax exemption under an incentive order for certified small-scale industrial units was interpreted to apply to a unit engaged in bulk purchase and repacking of edible oil. The Court treated the term "manufacture" in the exemption scheme as requiring a liberal construction consistent with the object of promoting industrial activity, rather than a narrow excise-based meaning. Because the competent authority had certified the unit and the exemption was granted with knowledge of its repacking activity, the State could not later deny the benefit on the ground that no manufacture had occurred. The exemption was therefore held to be available to the unit.

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Issues: Whether a small-scale industrial unit engaged in bulk purchase and repacking of edible oil was entitled to sales tax exemption under the Government Order granting relief on goods manufactured by certified small-scale industries, and whether such repacking could be denied the benefit on the ground that it did not amount to manufacture.

Analysis: The exemption was granted under the Government Order issued in exercise of power under section 19(3) of the Pondicherry General Sales Tax Act, 1967 for goods manufactured by certified industrial units. The assessee had been certified by the competent industrial authority as a small-scale unit and the exemption was granted with knowledge of its activity of repacking edible oil. The Court applied the earlier ruling on an identical exemption scheme and held that the term "manufacture" in such an incentive order must receive a liberal construction consistent with the object of promoting industrial activity, rather than a restrictive excise-based meaning. Since the State had itself issued the eligibility certificate and extended the exemption to the unit, it could not later deny the benefit on the basis that no manufacture had taken place.

Conclusion: The assessee was entitled to the sales tax exemption, and the High Court's denial of the benefit was unsustainable.

Ratio Decidendi: Where a sales tax exemption is granted to certified small-scale industrial units under an incentive order, the expression "manufacture" in that order must be construed liberally in light of the object of industrial promotion, and the State cannot deny the exemption to a duly certified unit merely because its activity consists of bulk purchase and repacking.

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