SSI exemption cannot be denied solely because a partnership reconstitutes, if the registered unit and name remain unchanged.

Small-scale industry exemption under Notification No. 175/86-C.E. could not be denied merely because a partnership's constitution changed while its name and existing industrial registration remained unchanged. The firm had already been registered as a small-scale unit and continued to hold that registration; the notification did not require fresh registration each time partners retired or joined. In the absence of any change in the identity of the registered unit or evidence that the registration had ceased, the authorities were not justified in withholding the exemption for the intervening period. Denial of SSI exemption on the ground of absence of fresh registration after reconstitution was therefore incorrect in law.

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Issues: Whether the benefit of the small-scale industry exemption under Notification No. 175/86-C.E. could be denied merely because the constitution of a partnership firm changed while its name remained the same.

Analysis: The firm had already been registered as a small-scale unit and had been availing the exemption. The change was only in the partners of the firm, with three partners retiring and a new partner joining, while the firm's name continued unchanged. The registration with the Directorate of Industries was not shown to have ceased or required renewal merely because of this internal change in constitution. The exemption notification did not prescribe any condition that a fresh registration had to be obtained on every change in the constitution of the firm. In the absence of any change in the identity of the registered unit as reflected by its name and existing registration, the authorities were not justified in denying the exemption for the intervening period.

Conclusion: The denial of SSI exemption on the ground that fresh registration was necessary after change in partnership constitution was incorrect in law. The issue was decided in favour of the assessee.

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