New unit exemption turns on whether later production is different goods, not on common ownership or a circular.

Section 4-A of the U.P. Sales Tax Act, 1948 was read to cover a later factory set up by an existing dealer at another place or adjacent to an existing unit, and the decisive enquiry was whether the later unit manufactured the same goods as the earlier one. Because one unit produced paracetamol and the later unit produced ampicillin trihydrate and ampicillin anhydrous, they were treated as different goods, and common ownership or shared registration-related features did not defeat new-unit status. A departmental circular could not override the statute and did not justify refusal of exemption. The rejection was set aside and the matter remitted for fresh consideration under the statutory definition.

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Issues: (i) Whether the second manufacturing unit was a "new unit" entitled to exemption under section 4-A of the U.P. Sales Tax Act, 1948. (ii) Whether the Commissioner's circular could justify refusal of exemption on the facts of the case.

Issue (i): Whether the second manufacturing unit was a "new unit" entitled to exemption under section 4-A of the U.P. Sales Tax Act, 1948.

Analysis: The expression "new unit" in section 4-A(2), explanation (i), covers a factory or workshop set up by an existing dealer at another place in the State, and also an industrial unit manufacturing other goods on or adjacent to the site of an existing factory or workshop. The decisive questions were whether the later unit manufactured the same goods as the earlier unit and whether it fell within the statutory exclusion. The two units were owned by the same company, but the earlier unit manufactured paracetamol while the later unit manufactured ampicillin trihydrate and ampicillin anhydrous. These were treated as different goods for the purpose of section 4-A. Mere common ownership and the absence of separate entries in the name of the later unit over land, building, machinery, or registration did not negate the statutory character of the later unit as a new unit.

Conclusion: The later unit was entitled to be examined as a new unit and the rejection of exemption on the stated ground was unsustainable.

Issue (ii): Whether the Commissioner's circular could justify refusal of exemption on the facts of the case.

Analysis: The circular was treated as a clarification and not as a source of exclusion or inclusion beyond the statute. It only indicated that use of finished goods of an earlier unit as raw material for a later unit would not by itself justify refusal of exemption. The circular could not override section 4-A, and it did not support denial of exemption where the real statutory question was whether the goods manufactured by the two units were the same. The authority had misdirected itself by relying on the circular instead of applying the statutory definition correctly.

Conclusion: The circular did not justify rejection of the petitioners' claim.

Final Conclusion: The impugned rejection was set aside and the matter was remitted to the authority for a fresh decision on the review application in accordance with the statutory definition of "new unit"; the writ petition was therefore allowed with consequential interim protection.

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