Small-scale industrial unit exemption applies after reclassification, with prior medium-scale benefit period adjusted.

An industrial unit that was originally registered as medium scale but later came within the small-scale category after the investment limit was enhanced was held entitled to the sales tax exemption available to small-scale units under the Industrial Policy Resolution, 1989 and connected notifications. Eligibility was determined by the unit's category at the relevant time, and the absence of an express clause covering downgraded units did not justify denial of the concession. The benefit was allowed as a small-scale unit, subject to adjustment for the period during which the unit had already received medium-scale exemption.

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Issues: Whether an industrial unit that was originally a medium scale unit but subsequently registered as a small-scale unit was entitled to the sales tax exemption available to small-scale industrial units under the Industrial Policy Resolution, 1989 and the connected sales tax notifications.

Analysis: The entitlement to incentive under the policy depended on the category in which the unit fell at the relevant time. Once the unit came within the small-scale category by reason of the enhanced investment limit and obtained registration as such, it became eligible for the benefits attached to that category. The absence of a separate express clause for a downgraded unit did not justify denial of the exemption, because the policy and notifications granted concessions on the basis of the industry category and were intended to extend the benefits to units falling within that class. The Court found the State Level Empowered Committee's view to be rational and accepted that the petitioner should receive the small-scale unit benefit, adjusted by the period during which it had already enjoyed medium-scale exemption.

Conclusion: The petitioner was entitled to sales tax exemption as a small-scale industrial unit for the prescribed period, reduced by the period for which it had already enjoyed exemption as a medium scale unit.

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