Factory identity under exemption rules is not lost by partial transfer of premises and machinery, preserving notification relief.

Partial transfer of land, premises, plant and machinery from an earlier manufacturing unit does not by itself extinguish the identity of the original factory for purposes of Notification No. 175/86-C.E. The operative test was whether the respondent manufactured goods in the same factory of the predecessor unit or in a new and distinct factory. On the facts accepted, the earlier manufacturer continued to exist and there was no material to show that its factory had ceased to survive. Mere acquisition of some assets of another unit was therefore insufficient to deny exemption on the basis of the predecessor's clearance history.

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Issues: Whether the respondent was entitled to exemption under Notification No. 175/86-C.E. for the disputed period when only part of the premises, plant and machinery of the earlier factory had been transferred to it, and whether such transfer destroyed the identity of the original factory for the purpose of the clearance limit in paragraph 3(b) of the notification.

Analysis: The exemption was claimed to be unavailable on the footing that the predecessor unit had crossed the prescribed clearance value in the preceding year. The dispute turned on whether the respondent's manufacture took place in the very same factory of the earlier unit or in a new and distinct factory. The finding accepted by the appellate authority was that only part of the land, premises, plant and machinery had been sold, while the earlier manufacturer continued to exist and there was no material to show that its factory had ceased to survive. Mere acquisition of some machinery and part of the premises of another unit did not extinguish the identity of the original factory or establish that the respondent manufactured goods in that same factory for purposes of the notification.

Conclusion: The respondent was not to be denied the exemption under Notification No. 175/86-C.E. on the ground alleged by the department.

Final Conclusion: The appeal failed because the transfer of only part of the premises and machinery did not amount to extinction of the earlier factory's identity, and the exemption could not be denied on that basis.

Ratio Decidendi: Partial transfer of a factory's premises and machinery does not by itself extinguish the identity of the original factory or justify denial of exemption meant to be tested with reference to manufacture in that factory.

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