Exemption for small-scale units denied where auction-purchased industrial unit retained old machinery and was not a new unit.

A small-scale industrial unit purchased in auction with existing plant and machinery was held not to qualify as a new unit for exemption under the Karnataka sales tax notification. The notification under section 8A(1)(b) applied only to tiny and small-scale industrial units meeting the prescribed conditions and expressly excluded units using old, used or second-hand machinery, as well as units formed by expansion, diversification, modernisation, or a new name after closure of an earlier unit. Because the unit had previously existed under another concern and retained the same machinery after transfer, the decisive factor was the character of the unit, not the change in ownership. The revisional authority was justified in treating the appellate order as erroneous and prejudicial to Revenue under section 22A(1).

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Issues: Whether a small-scale industrial unit purchased in auction with existing plant and machinery could claim exemption under the sales tax notification as a new unit, and whether the revisional authority was justified in interfering with the appellate order.

Analysis: The notification under section 8A(1)(b) of the Karnataka Sales Tax Act, 1957 extended exemption only to tiny and small-scale industrial units satisfying the prescribed conditions. The notification expressly excluded units in which any plant or machinery was old, used or second-hand, and also excluded units formed by expansion, diversification, modernisation, or by a new name after closure of an earlier unit. The purchased unit had earlier belonged to another concern, had already been in existence since 1988, and on transfer through auction retained the same plant and machinery. The decisive factor was therefore the nature of the unit, not merely the change in ownership. On these facts, the unit was not a new unit but an old and second-hand unit, and the exemption was unavailable. The revisional authority was therefore justified in holding that the appellate order was erroneous and prejudicial to the interests of the Revenue under section 22A(1) of the Karnataka Sales Tax Act, 1957.

Conclusion: The appellant was not entitled to the notification benefit, and the revisional interference was valid.

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