Incentive Scheme exemption survives job work outside factory when finished goods are manufactured and sold by the eligible unit.

An industrial unit entitled to exemption under the Incentive Scheme, 1987 does not lose that benefit merely because part of the manufacturing process is carried out outside its factory premises on job work basis. The exemption attaches to the eligible unit on the strength of its qualifying fixed capital investment and the eligibility certificate issued by the screening authority. Where the finished goods are manufactured and sold by the unit, outside assistance for a part of the process does not change the character of the goods or defeat the exemption. The assessee therefore retained the scheme benefit.

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Issues: Whether an industrial unit entitled to exemption under the Incentive Scheme, 1987 loses that benefit merely because part of the manufacturing process is carried out outside its factory premises on job work basis.

Analysis: The benefit under the Incentive Scheme attaches to the eligible industrial unit on the strength of its qualifying fixed capital investment and the eligibility certificate issued by the competent screening authority. The scheme does not make exemption dependent on every stage of manufacture being performed within the unit's own premises. Where the finished goods are manufactured and sold by the unit, the mere use of outside industrial assistance for a part of the process, for reasons of business necessity or expediency, does not alter the character of the goods as those of the unit for the purpose of exemption.

Conclusion: The assessee did not forfeit the exemption under the Incentive Scheme, 1987 because part of the manufacturing process was undertaken outside the factory premises on job work basis.

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