Tax holiday eligibility for a new small scale industry depends on proper registration and proof of dealer-caused economic harm.

Eligibility for tax holiday for a newly set up small scale industry depended on valid registration showing the relevant factory premises; because permanent registration reflecting the operating premises was obtained only on 30 January 1987, the unit could not be treated as newly set up before that date. Refusal of an eligibility certificate on the ground of impaired economic viability also required a specific factual finding that the dealer's own conduct adversely affected that viability; mere irregularity of orders or dependence on a purchaser was insufficient. The orders were set aside and the claim was directed to be reconsidered from the date the unit could properly be treated as newly set up.

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Issues: (i) whether the unit could be treated as a newly set up small scale industry before 30 January 1987 for the purpose of eligibility for tax holiday; (ii) whether refusal of eligibility certificate on the ground of alleged lack of economic viability was justified.

Issue (i): whether the unit could be treated as a newly set up small scale industry before 30 January 1987 for the purpose of eligibility for tax holiday.

Analysis: The entitlement depended on the unit being duly registered as a small scale industry with the factory premises correctly reflected in the certificate. The provisional certificate did not show the factory at the later operating premises, and the permanent registration showing that premises was obtained only on 30 January 1987. On that basis, the unit could not be treated as newly set up at the relevant earlier stage.

Conclusion: The unit was not entitled to be regarded as a newly set up small scale industry before 30 January 1987, and eligibility could arise only after that date if the other conditions were satisfied.

Issue (ii): whether refusal of eligibility certificate on the ground of alleged lack of economic viability was justified.

Analysis: The proviso required proof that the dealer had done something adversely affecting the economic viability of the newly set up industry. Mere irregularity of orders or dependence on a particular purchaser was not enough without a specific finding that the dealer's conduct caused such adverse effect. The authorities had not made the necessary factual finding on this aspect.

Conclusion: Refusal on the ground of economic viability was not sustainable on the material recorded.

Final Conclusion: The impugned orders were set aside and the claim for eligibility certificate was directed to be reconsidered afresh from the date on which the unit could properly be treated as newly set up, with the relevant factual conditions to be examined according to law.

Ratio Decidendi: Eligibility for tax relief to a newly set up industrial unit requires a valid registration reflecting the relevant factory premises, and refusal on the ground of impaired economic viability must rest on a specific finding that the dealer's own conduct adversely affected that viability.

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