Industrial unit exemption depends on prior production and real expansion, not mere change of ownership or takeover.

Acquisition of a proprietary business concern by a company did not, by itself, amount to expansion, addition or modification of an existing industrial unit for rule 3(66a) of the Bengal Sales Tax Rules, 1941. The exemption was intended for newly set up small-scale industrial units that had commenced production, and a going concern was not automatically an existing industrial unit for this purpose. In the absence of proof that the concern had already begun manufacturing goods for sale before takeover, and without material showing alteration or diversification of the unit, the embargo in explanation (iv) did not apply. The eligibility certificate could not be refused on that basis.

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Issues: Whether the acquisition of a proprietary business concern by a company, without proof that the concern had commenced production, constituted an expansion, addition or modification of an existing industrial unit so as to attract the embargo in explanation (iv) of clause (66a)(i) of rule 3 of the Bengal Sales Tax Rules, 1941.

Analysis: The relevant exemption under rule 3(66a) was intended for newly set up small-scale industrial units that had started production. The expression "going concern" was held not to be ative by itself of an "existing industrial unit" within the meaning of the explanation. In the absence of any finding that the proprietary concern had actually begun manufacturing goods for sale before takeover, it could not be treated as an existing industrial unit. Mere change of ownership, without any material showing alteration, addition, expansion, or modification of the unit, was insufficient to bring the case within the mischief of the embargo. The revisional authority's assumption of diversification and expansion was unsupported by material.

Conclusion: The embargo in explanation (iv) was not attracted, and the company's application for an eligibility certificate could not be rejected on that ground.

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