Tax-holiday eligibility requires proof of disqualifying machinery use, relevant-period records, and a protected trade mark or brand name.

Eligibility for a tax-holiday certificate under rule 3(66a) turned on the statutory conditions for the relevant period. The applicants were not disqualified on the ground of prior use of machinery, because the record showed purchases from identified sellers and no proof that the factory was substantially set up with machinery already used by another tax-holiday unit. Earlier accounting or stock discrepancies could not by themselves defeat eligibility for the later period when no relevant-period irregularity was proved. The use of non-exclusive pictorial designs also did not amount to use of an existing unit's trade mark or brand name, so the rejection of eligibility was unsustainable.

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Issues: (i) Whether the applicants were disqualified from obtaining an eligibility certificate under rule 3(66a) of the Bengal Sales Tax Rules, 1941 on the ground that the factory was established with plant and machinery earlier used by another unit enjoying tax holiday. (ii) Whether alleged discrepancies in the books of account and stock statements for an earlier period could justify refusal of the eligibility certificate for the relevant period. (iii) Whether use of pictorial designs or marks on the goods amounted to use of the trade mark or brand name of an existing industrial unit so as to attract the embargo in rule 3(66a).

Issue (i): Whether the applicants were disqualified from obtaining an eligibility certificate under rule 3(66a) of the Bengal Sales Tax Rules, 1941 on the ground that the factory was established with plant and machinery earlier used by another unit enjoying tax holiday.

Analysis: The relevant condition required the applicants to keep vouchers and other documents for purchases of plant and machinery and to establish that the industry was not set up substantially with machinery already used by another unit that had enjoyed tax holiday. The record showed that the machines were purchased from identified sellers and there was no evidence that they had earlier been used in any other unit that had obtained the benefit. The two stirrers taken on loan from a sister concern were of negligible value and did not show substantial establishment with used machinery. On these facts, the disqualification was not made out.

Conclusion: The applicants were not disqualified on this ground and this reason for al of the eligibility certificate was unsustainable.

Issue (ii): Whether alleged discrepancies in the books of account and stock statements for an earlier period could justify refusal of the eligibility certificate for the relevant period.

Analysis: The alleged irregularities related to an earlier accounting period ending before the relevant eligibility period. The eligibility certificate had to be considered with reference to the specific period for which exemption was claimed, and an irregularity in an earlier year could not by itself defeat the claim for the later period. The maintenance of records under section 13 of the Bengal Finance (Sales Tax) Act, 1941 served a distinct statutory purpose, but there was no proved irregularity in the records relevant to the eligibility period under rule 3(66a).

Conclusion: The alleged accounting discrepancies did not furnish a valid ground for refusal of the eligibility certificate.

Issue (iii): Whether use of pictorial designs or marks on the goods amounted to use of the trade mark or brand name of an existing industrial unit so as to attract the embargo in rule 3(66a).

Analysis: The expression "trade mark" was construed in its legal and trade sense, with reference to the Trade and Merchandise Marks Act, 1958 and the object of the tax-holiday scheme. The evidence showed that the designs used were not distinctive, were used by several firms, and were not shown to be the exclusive property of any existing industrial unit. There was no case of infringement or passing off. The embargo in the rule was intended to prevent established concerns from obtaining tax benefits by using an established mark or brand name to masquerade as a newly set-up unit, which was not the present case.

Conclusion: The applicants did not violate the trade mark or brand-name restriction in rule 3(66a).

Final Conclusion: The applicants satisfied the conditions for the eligibility certificate for the relevant period, and the impugned rejection orders could not stand.

Ratio Decidendi: A claim for tax-holiday eligibility must be judged for the relevant period on the statutory conditions applicable to that period, and refusal cannot rest on unproved allegations of prior use of machinery, irrelevant earlier-period accounting discrepancies, or non-exclusive use of ordinary designs that do not amount to an existing industrial unit's trade mark or brand name.

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