Asset purchase of an old unit does not bar new industrial status when production starts afresh under the tax exemption rule.

A purchaser of an earlier industrial unit was treated as a newly set up small-scale industrial unit where it acquired only the land, building, plant and machinery and commenced commercial production afresh. Rule 22(9A) required the unit to be established and to start production for the first time on or after 1 June 1990, and not to be an expansion, addition or modification of an existing unit. Separate registrations and the absence of a transfer of the business as a going concern supported distinct entity status. The earlier unit's production date could not be attributed to the purchaser, so the refusal of the eligibility certificate failed.

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Issues: Whether the applicant's industrial unit was a newly set up small-scale industrial unit entitled to an eligibility certificate for remission of tax under section 8-1 of the West Bengal Sales Tax Act, 1954, or whether it was merely a continuation, expansion, addition or modification of the earlier unit so as to fall outside the rule 22(9A) definition.

Analysis: The decisive test under rule 22(9A) of the West Bengal Sales Tax Rules, 1954 was whether the unit had been established and had started commercial production for the first time on or after 1 June 1990 and was not an expansion, addition or modification of an existing industrial unit. The assets purchased by the applicant consisted of the land, building and plant and machinery of the earlier unit sold by the financial corporation. The expression "composite sale" in the High Court order was read as a composite sale of assets and not a transfer of the business as a going concern. The grant of separate registrations by the authorities also supported the conclusion that the applicant was a distinct entity and not the same business continuing under a new name. The earlier unit's date of commercial production could not be fastened on the applicant, and the only ground on which the eligibility certificate was refused therefore failed.

Conclusion: The applicant's unit was held to be a newly set up industrial unit within the meaning of rule 22(9A) and was entitled to the eligibility certificate under section 8-1 of the West Bengal Sales Tax Act, 1954. The rejection orders were unsustainable.

Ratio Decidendi: Where a purchaser acquires only the assets of an earlier unit and the purchasing concern is a separate entity that commences commercial production afresh, the unit is not treated as a continuation of the old business for the purpose of exemption tied to the date of first commercial production.

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