Exemption for in-unit assembly of ceiling fans applies even when component parts are made outside the unit.

A small-scale industrial unit registered for assembly of ceiling fans remained eligible for exemption where the final fans were assembled and tested in the unit, even though the component parts were manufactured elsewhere. The notification required that the exempt sales be of a commodity manufactured in the newly set-up small-scale industry, and the decisive activity was the registered assembly process carried out within the unit. The outside manufacture of components did not amount to non-compliance because those parts functioned only as raw materials or intermediates for the in-unit manufacture of the finished fans. The refusal of renewal of the eligibility certificate was therefore invalid, and the unit was entitled to renewal and the corresponding tax exemption.

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Issues: Whether a small-scale industrial unit registered for assembly of ceiling fans satisfied the conditions of the exemption notification when the component parts were manufactured outside the unit but the final ceiling fans were assembled and tested in the unit, so as to entitle it to renewal of the eligibility certificate.

Analysis: The notification granted exemption for sales of a notified commodity manufactured by a newly set-up small-scale industry and required proof that the exempt sales were of a commodity manufactured in such an industry. The decisive question was whether the relevant manufacturing activity, as reflected in the registration certificate, was the assembly of ceiling fans in the unit. Since the assembly and testing of the ceiling fans were carried out in the unit and the component parts functioned only as raw materials or intermediates for that activity, the fact that those components were manufactured elsewhere did not amount to non-compliance with the notification or the registration conditions. The manufacture of the components outside the unit was therefore not material to the claim for exemption on sales of the finished ceiling fans.

Conclusion: The ground for refusal of the eligibility certificate was invalid, and the applicant was entitled to renewal of the certificate and the corresponding tax exemption.

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