Small-scale industry exemption under a manufacturer-based proviso cannot be denied merely for lack of separate registration of a new factory.

Notification No. 175/86-C.E. contained a general requirement that a factory be registered with the SSI authorities, but its proviso created separate relaxations for a factory and for a manufacturer. The manufacturer-specific relaxation in proviso (b) applied where the assessee had been availing the exemption in the preceding financial year, and eligibility under that limb was not defeated solely because a second factory was not separately registered during the relevant period. The Tribunal treated the assessee's new unit as covered by that manufacturer-based condition and upheld the exemption, with consequential relief following from the setting aside of the denial.

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Issues: Whether the benefit of the small-scale industry exemption under Notification No. 175/86-C.E. could be denied for a second factory on the ground that the particular factory was not separately registered with the SSI authorities during the relevant period, or whether eligibility under proviso (b) depended on the manufacturer having availed the exemption in the preceding financial year.

Analysis: Paragraph 4 of the notification required registration of a factory with the SSI authorities as a general condition, but the proviso carved out two distinct relaxations. Clause (a) dealt with the factory and linked the relaxation to the quantum of clearances from that factory. Clause (b), by contrast, operated on a different footing and was directed to a manufacturer who had been availing of the exemption during the preceding financial year. The facts showed that the manufacturer had already been enjoying the notification in respect of its earlier unit, and the Tribunal treated the present case as falling within the same principle previously applied in earlier decisions relied upon by the assessee.

Conclusion: The exemption could not be denied merely because the second factory was not separately registered during the relevant period, since the manufacturer satisfied the condition in proviso (b). The issue was decided in favour of the assessee.

Final Conclusion: The denial of exemption was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Where an exemption notification contains separate relaxations for a factory and for a manufacturer, the manufacturer-specific condition must be applied according to its own terms and cannot be defeated solely by the absence of separate registration of a newly set up unit during the relevant period.

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