Natural justice and section 4-A eligibility: new rejection grounds without hearing were invalid, and exemption denial failed.

An exemption application cannot be rejected on new grounds without prior notice or a meaningful opportunity to meet them, as that offends natural justice; the rejection on such grounds was invalid. Objections based on alleged use of old machinery, later factories registration, and the dates of electric connection and raw material purchase did not justify denial of eligibility under section 4-A, because the machinery was purchased before the relevant amendment, the registration certificate existed, the operative date was actual commercial production, and the binding departmental circular supported exemption from that date. The adverse order was set aside and the eligibility certificate was directed to be issued.

---

---

Issues: (i) whether the rejection of the exemption application on new grounds without prior notice or opportunity of hearing was valid; (ii) whether the objections regarding old machinery, factories registration, and the dates of electric connection and raw material purchase justified denial of eligibility certificate under section 4-A.

Issue (i): whether the rejection of the exemption application on new grounds without prior notice or opportunity of hearing was valid.

Analysis: The impugned order introduced new and additional grounds for rejection which had not been specifically put to the petitioner earlier. The petitioner was not called upon to explain those grounds before the decision was taken. The record did not show any meaningful opportunity to meet the proposed basis of rejection. Such procedure offended fair play and the requirements of natural justice.

Conclusion: The rejection on new grounds without notice or hearing was invalid and could not be sustained.

Issue (ii): whether the objections regarding old machinery, factories registration, and the dates of electric connection and raw material purchase justified denial of eligibility certificate under section 4-A.

Analysis: The objection based on purchase of an old sheet-cutter machine failed because the purchase was prior to the amendment introducing the requirement that the machinery must be unused in India. The objection based on registration under the Factories Act also failed because the registration certificate was available and the departmental circular permitted exemption from the date of actual production even if registration was granted later. The objections founded on the dates of electric connection and earlier raw material purchase were rejected because the relevant consideration was the actual start of commercial production, and the later artificial definition of starting production could not govern the case. The Court also treated the departmental circular as binding on the authorities.

Conclusion: The objections were untenable and did not justify refusal of the eligibility certificate.

Final Conclusion: The petitioner was entitled to the incentive claim under section 4-A, and the adverse order was set aside with a direction to issue the eligibility certificate.

---