Industrial unit set-up date and pilot plant status governed sales tax exemption under the Government Order.

An industrial unit manufacturing plywood qualified for sales tax exemption under the Government Order because it was held to have been set up only after 17 December 1976. "Set up" was construed to mean that the unit had reached a condition of readiness for manufacturing, not merely that preliminary steps had begun. A pilot plant erected for experimental test production was not treated as the relevant industrial unit under the order. On the stated facts, the substantial machinery for the regular unit was installed in 1977-78, electricity was obtained on 1 September 1977, and regular production began on 1 December 1977, so the exemption applied for five years from regular production.

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Issues: Whether an industrial unit for the manufacture of plywood was "set up" on or after 17 December 1976 so as to qualify for exemption from sales tax under the Government Order, and whether a pilot plant used for experimental test production could be treated as the relevant industrial unit.

Analysis: The exemption under the Government Order applied only to industrial units set up on or after 17 December 1976 in scheduled areas and then entitled to exemption for five years from the date of regular production. A pilot plant erected only for test production and experimental purposes was held not to be the industrial unit contemplated by the Government Order. The expression "set up" was treated as meaning that the unit had been brought into a condition in which it was ready to function as a manufacturing organisation, not merely that preparatory operations had begun. On the facts, the substantial machinery for the regular unit was purchased and erected in 1977-78, electricity connection was obtained only on 1 September 1977, and regular production commenced on 1 December 1977.

Conclusion: The industrial unit was set up only after 17 December 1976, the pilot plant did not disqualify the respondent, and the respondent was entitled to the sales tax exemption for five years from the date of regular production.

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