Outside job work in manufacturing did not defeat tax exemption where the final product was made by the industrial unit.

A small-scale industrial unit registered to manufacture corrugated paper board remained eligible for sales tax exemption where the notification required the final product to be manufactured in the unit, but did not mandate corrugation within the unit or a corrugation machine as an essential condition. The Tribunal held that obtaining the corrugation stage through outside job work, or sourcing corrugated roll as an intermediate input, did not defeat the exemption when the essential manufacturing activity was the production of corrugated paper board by the unit. The refusal of the eligibility certificate and denial of tax holiday were therefore unsustainable.

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Issues: Whether the refusal of eligibility certificate and denial of tax holiday were justified on the ground that the corrugation stage of corrugated paper board manufacture was carried out through outside job work and not wholly within the industrial unit.

Analysis: The relevant notification granted exemption to sales of notified commodities manufactured by a newly set up small-scale industry and required records to show that the exempt sales were of commodities manufactured in such industry. On the facts, the unit was registered for manufacture of corrugated paper board, the corrugated roll was identified as the raw material for further processing, and the registration and machinery certificate did not require a corrugation machine or mandate corrugation within the unit. The Tribunal held that the essential manufacturing activity was the manufacture of corrugated paper board in the unit, and that obtaining corrugated paper roll from outside, whether by purchase or by outside corrugation work, did not violate the notification.

Conclusion: The outside corrugation work did not disqualify the applicant from the exemption, and the rejection of the eligibility certificate was unsustainable.

Ratio Decidendi: Where a small-scale industrial unit is required to manufacture the final product in its unit and the disputed outside process is not an obligatory operation under the registration or notification, obtaining that intermediate input or process from outside does not defeat eligibility for tax exemption.

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